PLANADVISER - July/August 2019 - 27

businesses there. But there are still few firms that do both
really well and do both with scale. That's what CAPTRUST is
seeking to build right now. "
For context about its plans for future deals, CAPTRUST
has a goal to be generating $400 million in annual revenue
by 2026.
" We believe we'll have probably 1,100 employees by that
point, " Shoff says. " To this end, we have some additional
pending deals we hope will close by the end of the year,
in addition to the ones we have recently announced with
McQueen, Ball & Associates and Cornerstone Capital Advisors.
It's a very active and exciting time. "
As with the other firms that have joined CAPTRUST
says, the acquisition conversations
recently, Shoff
concerning these two did not start randomly. Instead,
CAPTRUST staff leveraged existing relationships to get the
ball rolling. In this respect, independent firms that want to
join the likes of a CAPTRUST will have to do more than just
sit and wait for a knock on the door.
" I think traditionally there has been an industry perspective
that it's the investment bankers or M&A consultants
who go out and drive much of the acquisition activity, " Shoff
says. " While that may be true for other acquirer firms, it
hasn't been true for us. With almost all of the groups that
have joined us in recent years, the discussions started
because we had some existing relationship with their
advisers. For us, relationships still matter. "
Adviser Networks and Alliances
Independent practices that want to remain that way but are
concerned about their competitors' increasing growth and
sophistication may turn to the third main camp of aggregators,
which are more accurately described as " adviser alliances "
or " adviser affiliation networks. " Resources Investment
Advisors and GRP Advisor Alliance are two examples
in this category.
" We're here to support those independent advisers who
know that more and more services are being demanded by the
end clients-by participants and plan sponsors, " says Morris
about Resources Investment Advisers. " For adviser teams to
be able to keep up with that kind of demand at the same time
they're seeing margin compression, they have to have some
kind of scalable support. It'll be a matter of survival. "
For independent firms, the outsourcing of the back-office
tasks allows for a redirection of time, energy and focus back
into the things that matter most for building a business-
the interactions with clients and prospects. Morris says
succession planning also usually becomes a big part of the
discussion when independent RIA firms ask for more information
about what it would mean to work with Resources
Investment Advisors.
" We have positioned ourselves as a niche player that can
provide an interim step prior to considering selling the practice
to a strategic acquirer or an aggregator, " Morris says.
" Working with a firm such as ours, you can get access to the
sorts of client solutions that the main competitors in the
marketplace-say a CAPTRUST firm-will have. We also put
together a succession plan that means we're there to back
you up in case something unexpected happens. Independent
RIAs that want to remain independent find this combination
very attractive. "
" Working with us is also about building and maintaining
a practice that can deliver something that's really
valuable to clients, " Chetney says. " In the last decade, the
adviser community has had great success in promoting plan
outcomes through the use of automatic enrollment and
investment features. In an interesting way, this success has
brought the focus back on the need for genuine one-on-one
advice. Unfortunately, we all know, the economics of delivering
this advice are so challenging. This is why you need
some kind of scalable support solution that allows you to get
back out there and talk to people. "
While the alliance approach offers the most flexibility
when it comes to choice of business model and brand, some
degree of centralization and sacrifice of control is always
necessary in order to gain from economies of scale. Morris
and Chetney say independents may at first feel uncomfortable
outsourcing key processes of investment monitoring or
client communications, but they will quickly see the benefit
of having more time and resources to devote to real advising.
" We support 28 different brands in the advisory marketplace,
and they have no problem remaining unique and
pursuing their own specific value propositions, " Morris says.
" If you think about it, independent broker/dealers [B/Ds] such
as an LPL or a Raymond James have been doing this sort of
thing forever-running in the background supporting advisory
businesses. What we're trying to do is to provide this
kind of support but to do it from the RIA perspective, rather
than from the broker/dealer perspective. "
Can Shops Remain Fully Independent?
Chetney, Morris, Parrish and Shoff generally agree that the
retirement advisory industry of five or 10 years from now
will look much different than the landscape today-and
that now is the time for independent shops to figure out
which route to take.
" I think we'll end up in a barbell situation as an industry, "
Morris suggests. " We'll still have some of the smallest shops
that haven't made the national stage that still have fully
independent, niche retirement practices. They may be able
to survive based on the strength of their local key relationships.
That's probably the only part of the market that could
be somewhat insulated from the scale pressure, given those
very personalized relationships. "
Middle-of-the-road advisers will likely face the biggest
issues about remaining competitive while staying independent,
Morris says. " I'm thinking about the midsize shop
that maybe won an RFP [request for proposals] against
some nonspecialist competition five years ago, but now the
next round of RFPs is coming, and this time it's going to be
competing directly with the national players or with another
local shop now tied into a national player. I expect you'll see
the middle-of-the-road firms accumulated or merged. "
" There aren't any absolute answers here, " Chetney
observes. " Independent shops may remain successful if they
really carve out their niche. " -John Manganaro
planadviser.com July-August 2019 | 27
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