YSOs under pressure to do more

Historically, Offices of Supervisory Jurisdiction, or OSJs, provided office space and registered representative compliance oversight for independent brokers/dealers, managed their licensing and registration, acted as intermediary with the brokerage firm and met regulatory requirements. , boring bureaucratic stuff that most Independent Representatives avoided.

Many advisors have realized that if they forbid creating a large OSJ together, they could leverage that scale to negotiate better deals for each of them with their broker/dealer, custodian, or other vendors.

But the OSJ space has now diverged, according to stakeholders, between those seeking pure scale — those with $10 billion or more in assets and more than 100 advisers — and those who have built national brands and provide a significant amount of infrastructure and support for advisors, including in some cases holding a registered investment advisory firm under which these advisors can work.

Nate Lenz, Founder of Concurrent Advisors

Take Concurrent Advisors, a San Diego-based Raymond James Financial Services OSJ, which brought in $3.5 billion in assets under management in 2021, and will likely add another $4 billion in 2022. Nate Lenz, 32, started the company over five years ago with a group of eight consultants, all of whom started out as his consulting clients, pooling their resources.

The business had a somewhat disjointed start. Lenz and his partner, Scott Steele, began with a 45-day drive in a 1999 Ford C-Class motorhome down the east coast to pitch their vision to potential advisor clients, even sleeping in Wal-Mart parking lots.

OSJ now has 130 producer advisors, not counting the 25 support staff employed by the company, about half of whom were hired last year, for total assets of $13.5 billion. Teams that have been with the company for at least a year added $807 million in net new assets, with 14 of those teams earning $20 million or more in new assets.

Lenz says the main idea is to offload much of the non-differentiating, non-revenue-generating functions from the advisor. This includes transition support, digital marketing, practice management, technology support, monitoring, HR, legal and virtual administration.


RV Nate Lenz and his partner, Scott Steele, traveled up the East Coast to launch Concurrent Advisors.

The network is billed as a way to share the collective know-how of its advisers, who collaborate on best practices and share their M&A expertise, which can be useful for wirehouse breakaways getting into the business. independent business.

The company started with operational and middle-office services and then began to move into areas that affect the end customer, Lenz said, such as virtual administration and digital marketing, which can be branded in white by OSJ advisers. The company also has five certified financial planners on staff, available for advisor use per household.

This infrastructure, he argues, is what sets Concurrent apart.

“I think there are what I’ll call ‘worthy competitors,'” Lenz said. ‘ve categorized as “suitors”. And usually these companies are existing production teams. So choose a production team with $500 million in assets that has maybe two sales assistants, maybe a scheduler financier, someone who trades for their models,” he said. These advisers too often try to take advantage of this activity as administrative support to recruit.

“What ends up happening is that these people who focus on these core functions, it becomes their value proposition, which can work on a limited basis, but they’re not really able to scale this business,” he said. -he declares.

Last July, Concurrent sold a minority stake to Merchant Investment Management, a New York-based private partnership that provides growth capital and other support to independent financial services companies. The deal allowed Concurrent to create a capital solutions offering for its underlying advisors, in which advisors sell a minority stake in their practice in exchange for cash proceeds and an equity stake in Concurrent. Advisors who choose this capital program then have access to working capital that they can use as they see fit, whether for acquisitions and recruitment or to reinvest in their business. Fifty-five of its total 70 teams have joined this program so far, creating some rigidity for the company.

Private Advisor Group, a LPL Financial super OSJ based in Morristown, NJ, did something similar by selling a minority stake to Merchant, its first outside investor, in December. The move paves the way for the company to offer some form of capital to its advisors.

“These OSJs are, ‘OK, while my underlying advisors are 1099 independents, how can I create more buy-in to our business? How can I create more dependence on our business?’” So now there is a race to create,” said Paul Lally, Senior Director and National Wealth and Asset Management Industry Leader at Wipfli, which provides insurance, accounting, tax and industry-focused consultancy.

Partnership programs, Lally said, allow both OSJ and advisors to benefit from each other’s success.

“You want everyone in the canoe rowing in the same direction,” he said. “You’re still running your own business, your own underlying practice that serves clients, generates good income for you, but we want to be able to motivate, motivate and retain you by sharing something bigger, being our business.”

The Good Life Companies, a network of independent advisors based in Reading, Pennsylvania, which includes a large corporate affiliate of LPL Financial, has built something close to a nationally recognized brand, with more than 200 advisors and a goal of exceeding $10 billion in assets this year, said Conor Delaney, founder and CEO of The Good Life.


Good Life Founder and CEO Conor Delaney

The Good Life has long offered a turnkey service model, providing real estate, infrastructure, technology, training and support, to help advisors become independent. Last summer, OSJ launched a new RIA and joined the Protocol for Broker Recruiting to attract advisers who want to be independent but would have stayed away from The Good Life because they are reluctant to work with LPL. At the same time, Delaney says he was working with LPL to develop the company’s Strategic Wealth Services offering, its affiliate model for secondment advisers.

Delaney argues that the model of increasing OSJs for better pricing no longer works because many IBDs and custodians have begun to assert their own value to advisors, building on the same service offerings that OSJs use.

“So now these guys are like, ‘What am I doing? Because I can’t leave the company because my advisors are going to leave. And so my asset is worth nothing, because there is no value for the adviser to stay with us. And I can’t stay with the company because all these people come with a more compelling value proposition,” he says.

David Wood, founder of Gateway Financial Partners, a large LPL OSJ based in Glastonbury, Conn., sees an opportunity to acquire these types of OSJs. His firm recently announced its first major deal, the acquisition of fellow LPL OSJ Advisors’ Price, which he said was more of a traditional or facilitator-type OSJ, a group that came together to leverage the broker/dealer economy and didn’t offer much beyond that. The deal more than doubled Gateway’s advisor count, with the company now serving 170 advisors in 26 states and with a total of $7 billion in assets under management.

Gateway is more like “business-creating OSJs,” large organizations that provide infrastructure for advisors beyond just trying to leverage the economy. Gateway provides support in the areas of management, operations, marketing and technology.

“It’s not a one-and-done,” Wood said. “I think we’re really well positioned to present our strong value proposition to Advisors’ Pride members to help them grow faster than they can afford. And then we actively seek other people. We have a great value proposition, but I don’t think we have a large enough advisor base to take advantage of it.

Last year, the average Gateway advisor grew revenue by 40%, and Wood expects Advisors’ Pride advisors to benefit from this support for growth.

As Gateway looks to make more acquisitions, the company could tap into a capital partner such as Merchant, said Wood, which has taken stakes in other OSJ LPLs, not just to help fund other deals. in the future, but also for the leadership and the intellectual. capital that the RIA can obtain from these companies.

“I think there’s a bunch of these companies, like Merchant, that are now trying to really help their partners that they have an equity stake in, so that becomes another growth strategy for us,” Wood said.

“I think there are smaller YSOs that are going to be pressured because the adviser sits down and says, ‘Hey, this other company is doing all these things, and I’m not getting that from my current company. And I think it’ll be more relevant when the market isn’t growing 30% a year,” Wood said.

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