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Indie Consultants Squeezed as Big Firms Offer Freebies

By Murray Coleman February 7, 2017

When Jeff Spears started as a wealth management consultant seven years ago, he saw a growing wave of opportunity helping breakaway brokers leave Wall Street behind and set up their own independent advisory shops.

But by the end of March, the practice management expert plans to shutter his Sanctuary Wealth Services, which employs four people.

“After a certain point," Spears says, "a lot of our clients started attending industry conferences and getting offers from their custodians and asset managers for free education and support – they didn’t see a reason to keep paying Sanctuary."

He isn’t alone in facing increased outside competition. Indeed, the RIA custodial services arm of Fidelity Investments late last year launched a series of free and heavily discounted one-on-one consulting programs for practice managers. Meanwhile, rival broker and asset manager Charles Schwab is also ramping up its consulting menu as part of a longtime effort to keep in front of breakaways.

Contenders from broadly diversified financial services consultants such as McKinsey and Bain are doing much the same, Spears points out. At the same time, indie networks formed by the likes of Focus Financial Partners and HighTower are expanding support and training – either directly or through affiliated partnerships – to member advisors.

The reality of today’s marketplace, Spears says, is that advisors are finding practice management guidance “up the wazoo” at a “fraction of the cost” many standalone consultants can offer.

So are indie practice management consultants a thing of the past in wealth management? “Oh, goodness no,” Spears says. Although it's likely a "period of consolidation" will take place over the next several years, he remains confident that many independent consultants are going to find ways to compete against encroaching competitors and “do many of the same things that Sanctuary did.”

Jeff Spears

At the top of his list of survival skills is “not drinking too much of your own Kool-Aid,” Spears adds. By that he's referring to a discipline of "maintaining a critical eye on how your services really stand” at all times.

“At Sanctuary, I think we were a bit guilty of not stepping back often enough to objectively review how we fit into the bigger picture of a rapidly evolving RIA services marketplace,” Spears says.

Mike Byrnes, a practice management consultant in Kingston, Mass., believes that creating a highly flexible service model is key to his boutique firm's success.

To help gauge his true value to clients, Byrnes focuses on fine-tuning a client's growth strategies. That includes taking a "deep dive" into trends involving a group's profitability, revenue and book of clients.

“These are measurable goals where over time our clients can see distinct patterns developing,” says Byrnes, who estimates his consultancy is growing at a double-digit average annual pace since opening in 2008.

His business model also assumes that after a certain amount of time, clients will be educated enough in running their own practices that they’ll largely be self-sufficient.

“They still come back to us from time to time,” Byrnes says. “But our strategy isn’t to try to milk them dry through long-term contracts.”

Along those lines, he finds that advisors appreciate a service model that can adapt to changing market conditions by offering to take assignments on a month-to-month basis.

“These types of engagements are less scary to people – we could be working with someone for three months or five years,” Byrnes says. “The message we’re trying to deliver is that we want to help them to become more successful, not clients forever.”

Just like in an advisory practice, word-of-mouth recommendations are also critical to fueling consultants' long-term growth, suggests Ed Friedman, who oversees practice management at Dynasty Financial Partners.

The New York-based service provider works with 38 different indie RIAs. Dynasty provides management support in investments, technology, marketing and compliance. It can also help finance startups and provide acquisition capital for tuck-ins and buyouts. But Dynasty won’t directly take ownership stakes in member firms.

The platform’s revenue and membership are expanding at double-digit annual levels since forming in 2010, according to Friedman. “In general, we’re also seeing a commoditization in consulting services,” he says.

To keep referrals flowing, Dynasty is big on supplying clients with “high quality” and “highly focused” content – including partnership deals offering a variety of outside research, customized technology solutions and up-to-date prospecting materials.

The Dynasty service network also sponsors podcasts, conferences and an online practice management content library with educational materials written in-house as well as by outside parties. The firm also helps encourage and organize various work-study groups for its member RIAs.

“While we provide a consulting platform, we’re also creating a community,” Friedman says. “We believe that’s one of our strongest features – our advisors are independent but they’re not alone.”