It is no secret that in 2015, both the SEC and NASAA plan to issue rules that will require RIAs to implement continuity/succession solutions to protect clients from “key man” risk. We expect the first of the rules to be issued by NASAA in April 2015. This will potentially impact 13,000 state regulated RIAs that characterize themselves as financial planners. The problem is that the menu of easy to implement, institutional solutions we are aware of today is limited to just two – one of which is offered by Pinnacle Advisor Solutions. That is a very big supply – demand imbalance. That is not a line I would want to wait in.
Of course there are some alternative solutions. We anticipate the number of solicitations by buyers will increase and the number of conversations between study group members will soar. While these may be viable options for some firms, they will not meet the needs of most. We have learned a great deal from our research over the past several years. First, most independent RIAs have no interest in selling – at least not today, second, even when there is a willing buyer and seller, it is often very difficult to navigate culture, philosophy, process, control and price; and third, contingent agreements with fellow study group members tend to be informal and unenforceable. In most cases, written agreements have not even been drafted. To add to the challenges, few of the advisors who enter into these arrangements have the capacity to absorb a substantial influx of clients.
By contrast, Pinnacle Advisor Solutions offers a simple, contingent continuity solution called PRISM that costs you nothing to put in place and is revocable. We are usually able to execute an agreement within a few weeks of initial contact.
We believe Pinnacle is exactly the right size to merge in RIA’s averaging less than 100 million in AUM. We still have the culture and flexibility of a smaller firm with a well developed infrastructure, state of the art technology and more than 40 dedicated employees to provide a great foundation for continuing your great client service. In addition, we have real world experience in absorbing established practices.
There is, however, a finite number of firms we are willing to contract with as it would be impractical to have an open door policy.
If you have been struggling to find a solution for an unplanned exit from your firm, you are running out of time. While we encourage a thoughtful evaluation of your options, there is simply no downside to executing a PRISM agreement until you discover a better option.
You may find out that a better option doesn’t exist.
