Our industry has always looked down on Wall Street’s recruiting checks.  Last week there were numerous announcements that independent firms were offering advisors money to purchase their practice.  The term for these transactions is inorganic growth.  This week we will look at why these transactions are the new rage and examine if they are better than the old Wall Street checks.


Popeye and financial advisors fall for the “I’ll gladly pay pay you tomorrow for a Hamburger today” pitch.  Unfortunately Popeye and and most financial advisors provide their hamburger but seldomly get paid what the firms and Wimpy promise.  Why?  The advisors need the cash and Popeye is gullible.  On Wall Street the deals adjusted when the advisors changed firms looking for a new deal every five to eight years.  The recent Luminous departure shows that the advisory contracts need to be adjusted.  The new contracts are written by experienced firms and lawyers to prevent serial departures.  Wall Street has eventually learned and is paring back recruiting deals.  The new deal makers are experienced and have watched the mistakes of their peers.  Advisors still hold most of the cards but they will need to learn how to play their cards in the new sand box.


Most advisors are getting close to retirement and are starting to panic.  The advisor is expert at advising their clients on decisions that need to make for their retirement, but as we know the cobbler's son has no shoes.  David Devoe and Tim Kochis have built a business to help wealth advisory firms create a succession plan and if needed sell their firm.  David asks great questions and builds credible financial models and Tim has walked the succession path.  None of us want to retire because it evokes our ultimate death.  We should follow the advice we give our clients and start working on a plan today.

Deep Pockets

The firms that are buying our business have enough funds to insure their checks clear.  Their money coupled with their deal structure experience is good but is still missing something most successful advisory firms contribute.  The consultants call that skill organic growth.  Hightower 3.0 has hired a new team to help their private equity partners and the firm's advisors exceed their growth goals. I’m not convinced that the Fidelity alums will be able to deliver.  Time will tell if they understand the difference between inorganic growth and organic growth.

Every transaction has a winner and a looser.  Focussing on organic growth and eating most of the  inorganic growth money will increase your chances of success.


  1. Dynasty is offering inorganic and organic.

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