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Independent and Hybrid RIA Channels Lead in Advisor Headcount Growth

While established industry giants in the wirehouse channel make up four of the top-five broker/dealer (B/D) firms when ranked by assets under management (AUM), financial advisors continue their move toward independence, seeking greater flexibility to run their practices as they see fit, according to the latest Cerulli Edge—U.S. Advisor Edition.

Independent and hybrid registered investment advisors (RIAs) experienced the largest year-over-year advisor headcount growth rate, a trend that holds true over five- and 10-year periods. The promise of independence is alluring to advisors and continues to draw movement from the B/D to the RIA channels.

According to Cerulli, the number of independent RIA firms has grown at a compound annual growth rate (CAGR) of 2.4% over the last decade, while the number of advisors operating at independent RIAs has grown at a CAGR of 5.2% over the same period.

While Cerulli projects industry financial advisor headcount will remain relatively flat over the next five years, among all channels, independent and hybrid RIAs are projected to gain the most in advisor headcount marketshare. By 2027, Cerulli projects the channels will control nearly one-third (31.2%) of intermediary asset marketshare, continuing the trend of advisors and assets moving to these channels.

“Although the wirehouse channel dominates industry assets and average advisor productivity, the flexibility and higher payout percentages of independence is appealing to many advisors,” says Andrew Blake, associate director. “B/Ds will need to continue to leverage the benefits of working under corporate scale, which include access to technology, training, and client resources, to highlight the alluring aspects of affiliation with a major B/D. Otherwise, they risk seeing channel migration trends continue.”

U.S. Housing Recovery Offers Sustainable Opportunity

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The U.S. housing market appears headed for a recovery after years of volatility, as the compounding pressures of high interest rates, steep prices and scarce supply are expected to ease. New-home construction is forecast to rise 2% in 2024, while the home-improvement market should grow in 2024 and 2025 after a challenging 2023.

Morgan Stanley Research is anticipating structural changes in affordability, supply and financing in the next housing cycle. This could provide particular opportunity for sustainable investing in the housing market as demand for green home construction and renovation is expected to coincide with the U.S. housing market recovery, says equity strategist Michelle Weaver.

“Environmentally conscious consumers, government financial incentives and—in some cases—the declining cost of clean technologies should all drive growth in sustainable housing investing as the broader housing market picks up steam,” says Weaver.

Incentives to Go Green

The U.S. government is expected to continue playing a significant role in supporting environmentally friendly solutions and technologies, and developing local supply chains as the transition to greener homes gathers pace. For instance, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act included various tax credits, loans and grants to improve the energy efficiency and climate resiliency of residential buildings.

“These incentives don’t just benefit builders, developers and homeowners, they also bode well for shareholders of companies that manufacture and/or install energy-efficient and smart equipment, green building materials and clean technology for the home, as they boost demand by improving the economics of the green products,” says Laura Sanchez, head of sustainability equity research for the Americas.

Room for Improvement

Homeowners may also see a cost benefit from investment in green projects—but they need to be selective. Some projects pay off in the short to medium term, while others come with higher financial costs that may be difficult to recoup.

The shift to clean technologies used in onsite power generation, such as solar panels, stationary batteries and electric vehicle chargers, should bring down homeowners’ energy prices right away—especially in states such as California, where utility costs are high and rising.

Contracts with solar power companies, for instance, can yield savings immediately, since homeowners lease solar panels without any upfront costs and pay a monthly bill that typically works out to be cheaper than traditional utilities. These cost savings should help bolster the solar market, which Morgan Stanley Research analysts predict to grow from around $20 billion in 2024 to more than $30 billion by 2035.

Even products that involve an upfront cost can yield savings over the life of the investment. For example, the initial cost of insulating a home can pay for itself in a few years because of lower utility bills. The EPA estimates that homeowners can save an average of 15% on heating and cooling costs, or an average of 11% on total energy costs, by sealing and insulating their homes.

The drive for greener building standards can raise the cost of homes, putting them out of reach for large parts of the population. Already, increases in house prices and mortgage rates, combined with supply constraints, have meant affordability is at its worst levels since the 2007-08 global financial crisis. This environment disproportionately affects people based on race and ethnicity, age, socioeconomic status and other factors.

“So far, equity investment opportunities around the construction of social housing remains hard to find, but we think concerns about housing affordability should ultimately spur the government to implement policy aimed at supporting supply,” Sanchez says.

BNY Mellon Launches its New Platform Universal FX

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BNY Mellon announced the launch of Universal FX, a new foreign exchange (FX) platform that meets client needs to manage execution across their entire portfolio and access market-leading price transparency.

Universal FX supports BNY Mellon clients across all market segments, such as investment managers, corporates, hedge funds and wealth managers, as well as helping them navigate the industry transition to T+1 settlement.

The investment management industry often manages portfolios across several providers resulting in an inconsistent FX execution experience. Through Universal FX, clients can now manage their whole portfolio, irrespective of where they custody, prime broker or settle trades.

The solution provides access to Developed Market and Emerging Market currency execution, enhancing the FX experience for clients globally.

“Clients often have fragmented portfolios, causing friction, lack of transparency and inconsistency while accessing services across pricing, execution and post-trade,” said Jason Vitale, Head of Global Markets Trading, BNY Mellon. “With the launch of Universal FX and our existing OneFX product suite, our clients can now control and customize their portfolio in one place – gaining 360-degree insight, providing a seamless experience across the entire execution process. This also comes at a unique moment as clients seek streamlined solutions to adjust to the T+1 settlement cycle.”

This new offering builds on BNY Mellon’s OneFX suite of innovative solutions and banking capabilities for all FX trading, FX hedging and cross-border payment activities. OneFX is designed to seamlessly connect the entire FX spectrum, ensuring clients around the world have access to the latest new features and functionalities from BNY Mellon as they become available.

Adepa Chooses BlackRock’s eFront to Enhance its Private Assets Offer to Clients

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Adepa, the Luxembourg-based Alternative Investment Fund Manager (AIFM) and Fund Administrator, has selected eFront, a BlackRock technology solution dedicated to private markets.

This has allowed Adepa to strengthen the tailored services it provides to clients across private equity, private debt, infrastructure and real estate.

Following a competitive search process, Adepa chose the eFront platform for its client-service led approach and market leading alternative investment and data analytics capabilities. eFront solutions are available across Adepa’s entire business, including the Alternative Investment Fund Manager (AIFM) services, as well as Fund Administration and Transfer Agency.

Esteban Nogueyra, Head of Fund Administration at Adepa, said: “We are delighted to have partnered with BlackRock to implement its eFront technology, enhancing our Fund Administration and Investor Services solutions for leading alternative asset managers globally. By integrating eFront in our technology platform, we will provide a one-stop-shop combining the advantages of our back-office capabilities and leading alternative fund services expertise in Europe and Latin America, supporting our international expansion, and allowing our clients to focus on their core business.”

According to BlackRock’s 2023 Global Investment Outlook, investors will need to make more frequent changes to portfolios to adjust to a new investment regime characterized by greater volatility. The eFront platform provides clients with the data and analytics needed to inform investment decisions across all private capital asset classes.

“We’re incredibly proud to be working with Adepa, an industry leader dedicated to giving clients deeper portfolio insights that lead to unique, and meaningful, investment outcomes,” said Melissa Ferraz, Global Head of Aladdin Alternatives.

Top Ten Broker/Dealers Control 58% of Retail Assets

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The 10-largest broker/dealer (B/D) firms by assets under management (AUM) have 123,000 financial advisors and account for 58% of the total retail financial advisor industry. Fueled by a steady stream of mergers and acquisitions over the last decade, this top-heavy skew in the marketshare of AUM toward the largest firms underscores the need for scale to remain competitive in the marketplace, according to Cerulli’s latest Report, U.S. Broker/Dealer Marketplace 2023: The Challenging Pursuit of Organic Growth.

According to the research, over the last decade, one-fifth of the top-25 B/D firms by AUM as of 2012 have either been acquired or merged, reflecting the consolidation that has been characteristic of the B/D marketplace as firms are pressured to increase scale to remain competitive and maximize profit margins.

Very large B/Ds have leveraged their scale and their capital positions to outgrow their smaller counterparts with a five-year AUM compound annual growth rate of 8.4%, compared to large and medium-sized B/Ds with annualized growth rates of 6.6% and 6.9%, respectively.

The size and scale these firms offer make them attractive to financial advisors and to asset managers seeking shelf space.

“The advantages of scale for B/Ds include the ability to spread fixed investments in areas such as infrastructure, technology, and regulatory compliance across a larger advisorforce, which increases the return on those investments,” says Michael Rose, director.

It also provides B/Ds with leverage to maximize revenue from asset managers for distribution in its various forms, including revenue sharing, strategic marketing costs, and data packages. “Scale provides B/Ds with stronger negotiating power over asset managers that rely on B/Ds and their financial advisors to distribute their products, to include their offerings in B/D home-office models, or to select them within portfolios that advisors directly manage,” he adds.

Scale, however, is not a panacea for the many challenges that face B/D firms. “A growing number of advisors are demonstrating dissatisfaction with the bureaucracy associated with working for a large financial institution and are choosing alternative affiliation options, particularly hybrid RIA and independent RIA affiliation,” says Rose.

Cerulli recommends that B/D firms growing inorganically through M&A stay laser-focused on their firm cultures to ensure that their growth doesn’t have negative ramifications for advisor retention.

Fidelity Introduces New Resources to Support Advisors’ Transition to Independence

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To help advisors navigate the decision-making process and learn about the associated benefits, as well as address concerns of moving to an independent model, Fidelity created an Independence Hub, a central location for insights, tools, and practical steps to support advisors on their path to independence, including actionable guides for each phase of their journey—consideration, transition, and growth.

New research from Fidelity Investments shows that about 1 in 6 advisors have proactively switched firms in the past five years, with independent business models as the top destination.

In fact, 94% of advisors are happy with their decision to move, with 85% noting an increased control over their future. Despite this popularity, only half of advisors consider themselves knowledgeable about firm types (54%) and independent models (49%), and only 25% know the various intermediaries (e.g., 3^rd party recruiters, consultants, clearing or custody providers) that can help with finding a firm. Advisors may prefer independence and the benefits associated, but the lack of knowledge and fear of the unknown may be preventing them from taking that leap.

“Arming advisors with the resources needed to help expand their breadth of knowledge has always been a priority,” said Rohit Mahna, Head of Client Growth at Fidelity Institutional Wealth Management Services. “Fidelity is committed to leveraging its deep expertise to not only help educate advisors and provide the tools needed to facilitate better outcomes, but be a true collaborator as advisors look to build their businesses.”

Fidelity recently welcomed Concurrent Advisors to its platform after their move to independence, transitioning 60+ advisor teams with more than 20,000 accounts in just three months, and continuing to grow at a compelling pace.

“Meeting advisors where they are and helping them achieve their vision is key to what we do, and in many ways, Fidelity did that for us,” said Nate Lenz, CEO and Co-Founder at Concurrent Advisors. “From operating on a broker-dealer platform and wanting to take the next step to becoming fiduciaries for our clients, Fidelity opened the menu of possibility in terms of solutions, technology, and growth opportunities.”

New Independence Hub

Fidelity drew from its deep experience of business development, practice management, technology, and investment consulting to develop a suite of resources to help guide advisors through the various stages of independence, inform their decision, and be better prepared, no matter the phase of their journey. All accessible through the new Independence Hub:

RIA Valuation Tool, a new on-demand format, which helps advisors of all sizes understand their potential economics as they go independent, including increases in earnings and/or revenue compared to their current model. This online tool is a self-serve option for advisors who want a quick analysis, although those interested in deeper discussion can meet with Fidelity for a more thorough review of their business analytics.
New thought leadership, Build Your Own Tech Stack One Step at a Time, which outlines a simplified approach for newly independent advisors to get the tech they need, when they need it, and evolve as they grow. As technology becomes more imperative to advisors’ businesses, help in navigating the process of building a new tech stack enables advisors to find their best fit from a position of strength.

Increased Growth and Job Satisfaction Among Independent Advisors

Eighty percent of movers reported asset under management (AUM) growth since switching, with a median increase of 42%. In fact, Cerulli projects that independent and hybrid RIA channels will have a higher AUM growth rate over 5- and 10-year periods. Contrary to popular belief, nearly all advisors (99%) said their clients were ultimately supportive of their decision to move, with over half (54%) noting they were immediately supportive.

GenTrust made their move to independence more than 10 years ago, leveraging Fidelity’s diverse capabilities to help expand and grow their business.

“GenTrust was founded with the goal of providing holistic, conflict-free advice for its clients and attracting other advisors who value the same,” said George Perez, Founding Principal at GenTrust. “With its focus on being a destination for other firms to pursue independence, Fidelity provides us the resources and platform to support our business’s changing needs, allowing us to deliver a high level of service to our clients. Clients are at the core of who we are, and Fidelity’s experienced professionals understand and appreciate the importance of delivering the service our clients deserve, always striving to put their interests first.”

Among the many factors influencing an advisor’s decision to move, the top considerations include: compensation (51%), better firm culture (50%), and the ability to provide a higher level of client service (39%). The most notable concerns are: fear of the unknown (60%), client attrition (48%), and time spent transitioning vs. managing the practice (35%). However, 39% reported that none of their initial concerns ended up being a significant issue, and 68% agree they should have made the move sooner.

The Wealth Alliance was founded in 2019, and chose Fidelity as a destination to help support their clients’ needs and growth journey.

“We pride ourselves in supplying customized approaches and solutions for our advisors to accommodate their unique needs, and Fidelity helps us achieve that,” said Robert Conzo, CEO and Managing Director at The Wealth Alliance. “We wanted more, our clients wanted more, and Fidelity’s agility and custom-made strategy empowers us to build a destination that allows like-minded advisors to do the same for their clients.”

Dominion Capital Strategies Announces Promotion of Rodrigo Raffo to Latam Sales Director

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Dominion Capital Strategies announces the promotion of Rodrigo Raffo to the position of Latin America Sales Director.

In this role, Raffo will oversee sales and business development efforts in Latin America, leveraging his deep knowledge of the region’s financial markets and his extensive experience in the industry.

He has been an integral part of Dominion Capital Strategies since the company’s inception in 2017, where he has consistently demonstrated his dedication, expertise, and leadership, the firm said.

With over a decade of experience in the financial services sector, including more than 10 years at an Independent Financial Advisor (IFA) firm, Raffo brings a wealth of industry knowledge to his new role.

“Rodrigo’s deep understanding of the Latin American market and his proven track record in the financial industry make him the perfect candidate to lead our efforts in this strategically important region,” said Pablo Paladino, Global Sales Director at Dominion Capital Strategies.

This promotion underscores Dominion Capital Strategies’ commitment to aligning its strategy and culture with the unique dynamics of the Latin American market. As Latam Sales Director, Rodrigo will work closely with his team to provide the highest level of support to Independent Financial Advisors (IFAs) across Latin America, the press release added.

“Latin America offers tremendous opportunities for growth and innovation in the financial services sector, and I look forward to leading our team in delivering exceptional value to our clients and partners in the region,” Raffo said.

Patria Investments Announces Agreement to Acquire Private Equity Solutions Business from abrdn

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Patria Investments Limited (“Patria”) announced an agreement for the carve-out acquisition of a private equity solutions business from abrdn Inc. (“abrdn”).

Upon closing, the acquired platform together with this existing business will form a new vertical – Global Private Markets Solutions (“GPMS”). On a pro forma basis, GPMS is positioned to launch with an aggregate FEAUM of over $9 billion and will be led by Marco D’Ippolito. This vertical will further develop a complementary pillar of growth to serve as a gateway for Latin American investors to access private markets on a global scale, the firm said in a press release.

“We’re very excited to announce this new addition to Patria’s investment platform, which advances an important aspect of our growth strategy,” said Alex Saigh, Patria’s Chief Executive Officer. “As we continue to see a financial deepening unfold in the region, local investor allocations to alternatives are evolving from local products to more sophisticated global exposure to the asset class. The transaction will bring Patria in-house expertise in high-demand strategies that offer diversified exposure and an attractive performance track record. This business will increase Patria’s permanent capital AUM, further diversify our product menu, and should deliver an accretive earnings stream for our shareholders.”

Tailored client solutions and drawdown funds consisting of primaries, secondaries and co-investment strategies have grown into a major component of the private markets ecosystem. Primaries offer diversified exposure for investors and provide underlying general partners with an important source of anchor capital, while secondaries and co-investment strategies can provide investors with enhanced return profiles and improved portfolio management. Secondaries and co-investment strategies in particular have shown impressive growth in recent years, with global AUM growing at a CAGR of 16% and 21% respectively from 2019 to 2022, according Patria information.

The abrdn Private Equity solutions business operates from offices in London, Edinburgh and Boston, with a team of more than 50 employees. As of June 30, 2023, the platform manages $7.8 billion of Fee Earning AUM across the aforementioned strategies through drawdown funds, a listed private equity trust and separately managed accounts, with investment exposure primarily to the European and US middle market. With an impressive performance track record over 15 years, the business has built a loyal global client base, and has current investment relationships with more than 150 general partners.

Marco D’Ippolito, Patria’s Chief Corporate Development Officer said: “We are joining forces with a talented team that reflects Patria’s entrepreneurial investment culture, and acquiring an established solutions platform that brings differentiated investment capabilities to serve our clients. I am excited to work with Merrick and his team to fully leverage Patria’s platform as we grow together.”

Merrick McKay, the Head of abrdn Private Equity, said: “We are delighted to be the cornerstone platform in Patria’s new Global Private Markets Solutions strategy vertical, recognizing that this is Patria’s first acquisition outside Latin America. We believe that Patria is an excellent partner for our business and clients, as the combination will support and enhance our continued development as a leading European and US private equity solutions provider for institutional investors. This includes the ability to offer our private equity solutions to the fast-growing Latin American market where Patria has such a leading presence and strong reputation. We also look forward to working with Patria’s global distribution team, which manages Patria’s long-lasting relationships with many of the world’s most sophisticated private markets investors.”

Transaction Details
Transaction includes total consideration of up to £100 million (or currently ~$122 million) payable to the seller in cash, with £80 million as base value and £20 million contingent on certain performance factors. Timing of payments includes £60 million payable at closing, £20 million payable at 24 months from closing, and up to £20 million payable at 36 months from closing pending certain performance factors. The initial payment of £60 million will be financed through a bank credit facility maturing 36 months after closing. The transaction is expected to close in the first half of 2024 pending regulatory approvals, and is expected to be accretive to Patria shareholders in 2024. Rothschild & Co served as financial advisor and Macfarlanes LLP served as legal advisor to abrdn. Latham & Watkins LLP served as legal advisor to Patria.

Vontobel Appoints New Wealth Management Head for Miami Office

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As part of its continued growth in the US, Vontobel Swiss Financial Advisors (SFA) has appointed Victor Cuenca as Head of Wealth Management Miami Branch to build on its offering for Latin American clients.

Victor Cuenca brings more than 20 years of business development experience with institutional and private banking clients in Latin America, Spain and Portugal.

He will be responsible for strengthening wealth management client relationships in Miami and implementing Vontobel SFA’s business strategy with Latin American clients, including US and non-US residents in the Americas. Victor joins Vontobel SFA from Santander Private Banking in Miami, where he held various senior roles in financial advisory and business development.

Prior to that, he worked for Allfunds Bank, where he had the position of Head of Sales Spain and previously Regional Manager Latin America. He holds a Bachelor’s degree in Economics from the University of Alcala in Madrid and an Executive MBA from the IE Business School in Madrid.

“We are pleased to welcome Victor, whose client-focused track record is well aligned with our priority to delivering quality solutions to investors,” said Peter Romanzina, CEO of Vontobel SFA. “This appointment further demonstrates our commitment to maintaining strong growth in the US with an expanded footprint, while helping our clients diversify their wealth globally.”

“I am excited to join Vontobel SFA and bring this new offering from our Miami office to Latin American investors,” commented Cuenca on his appointment. “Vontobel’s personalized and added value services offer a great opportunity to high-net-worth individuals. Miami is closely connected to Latin America and is viewed as the financial capital for the region, so our presence here is key to developing this market.”

Nearly 30% of Americans Prioritize Buying the Latest Tech, Like iPhone 15, Over Paying Bills

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LendingTree, the online financial services marketplace, released survey results on how Americans prioritize technology in relation to their financial decisions.

The survey showed that 77% of Americans find it essential to have the latest technology and gadgets. This sentiment is particularly strong among younger consumers, with 88% of Gen Zers and 86% of millennials stating that having the latest technology is important to them.

Further data indicates that 28% of Americans would prioritize purchasing the latest technology over fulfilling basic financial obligations such as paying rent or bills.

Among Millennials and Gen Zers, the numbers rise to 45% and 38%, respectively. Additionally, of those who prioritize technology over financial commitments, 78% admitted they would choose to buy a new phone, such as the iPhone 15, over paying rent or bills.

Adding another layer to the financial aspect, the survey found that 26% of Americans have taken on an average debt of $1,492 to acquire the latest technology products. The items causing this debt are primarily phones at 69%, followed by computers at 41% and smartwatches at 27%.

Brand loyalty also surfaced as a point of interest in the survey. Specifically, iPhone users are more than twice as likely as Samsung users to upgrade to a new phone model when it is released, with percentages at 9% for iPhone users versus 4% for Samsung users. In contrast, 35% of Samsung users wait until their current phone breaks before purchasing a new one, compared to 24% of iPhone users.

Matt Schulz, LendingTree’s Chief Credit Analyst, provided a tip for consumers, stating that if they can afford to buy the latest technology and pay it off within a month or two, then they could proceed with the purchase. However, if they cannot afford it, Schulz advised consumers to start saving money to better afford the technology in the future.

“As cool as that new iPhone might be, avoiding unnecessary debt is a whole lot cooler. If you can afford to buy it and pay it off in a month or two, have at it. If not, make a plan and take it slow. Instead of rushing to buy, start putting some money aside to help you better afford it in a few months. Even if you can’t save enough to pay for all of it, what you are able to put away will help lower the interest you’ll pay in the future. Remember, this isn’t a one-time thing like a Taylor Swift or Beyonce concert coming to your town. These phones are going to be available for a long time, so there’s no rush,” Schulz said.