What's Now and What's Next for the Wealth Management Industry?


Recorded at the BNY Mellon | Pershing INSITE 2022.  Media Center Powered by:

Advisorpedia interviewed Brian Hamburger, Founder of MarketCounsel and the Hamburger Law Firm, at BNY Mellon | Pershing INSITE in June, 2022.

Related: Is Fear Holding Back Advisors From Changing Firms?

Resources: Integrated Partners | Flyer Financial Technologies | MarketCounselHamburger Law Firm


SPEAKERS: Matt Ackermann, Brian Hamburger

Matt Ackermann  00:05

What's now what's next for the wealth management industry? Well, then I want to insist that I turn to my smartest friends joined today by Brian Hamburger from market counsel. Brian, welcome.

Brian Hamburger  00:15

Thanks. . .

Matt Ackermann  00:15

So what is the big issue? that's top of mind for everyone right now.

Brian Hamburger  00:21

Everyone keeps talking about inorganic growth and m&a. It seems to be top of mind for so many advisors, recent. So really report that's out says a third of all RIA owners are going to exit the business within the next 10 years. So you know, whether you want to look at m&a in terms of inorganic growth, or you want to look at it in terms of an eventual exit. Certainly, business transactions are a significant issue for investment advisors today.

Matt Ackermann  00:48

You and I, over the years have talked about the exit the succession that needs to be happening, but the inorganic growth is an interesting options from the buyer perspective is right now a buyers market or a seller's market?

Brian Hamburger  00:59

You know, I think it's I think it's a market where people are getting more comfortable with transactions. The answer your question is it depends, right? It depends who was coming to you? Right? If someone's coming to you to acquire your business, they're gonna say, you know, hey, now's the time, right? Now's the time to sell. But then on the other hand, I think there are plenty of transactions that have been done that show you that, hey, there's, there's a buyers market to to be had. So I think some investment, some investment bankers describe the market as frothy. I like that term. Right? I think the market is, uh, you know, it doesn't necessarily have a specific direction, I think we'll see that emerge over time. But part of the problem is, these deals are inconsistent, right, we have some minority deals where folks are buying a small portion of a firm, we have, we have plenty of deals that are combination of cash, of stock of potential contingencies based upon the subsequent performance of the business. And so it's really hard to get good market valuations for these businesses.

Matt Ackermann  02:06

And it's interesting to me because people are working longer, but for these businesses to really handoff well, and for growth to happen, right? What's essential in terms of that handoff, so that essentially, you're getting the most out of the growth, and the most out of those clients that are moving from one advisor to the next?

Brian Hamburger  02:22

Well, I think that comes down to each advisor, right, every advisor has to determine for themselves. What does that succession or transaction look like? For many advisors, they you know, I urge them to go back to the beginnings of their firm, right? Why did you start your firm to begin with, and quite often it was autonomy, right? It was trying to create something that was lasting, that was multi generational, something where they can involve their next generation of staff convert their their book of business to something of enterprise value. And so the question is, well, what does that next transaction then look like? And for those that plan in advance, the best transaction is one that leaves it in the hands of GE to write the next generation of leaders within the firm, it's a way to really maximize wealth not only for the business owner, but also for that next generation. However, the truth is, many advisors don't make plans, you know, well in advance and as much as they are planners for their clients, right? It's the old, sealed shoemakers shoes, right? They they tend to get overlooked.

Matt Ackermann  03:25

Shifting now from growth to compliance. Always a hot topic, always something I love to find out from you. There's always so much noise sometimes feels like a didgeridoo is playing in the background. But what is the big compliance question the compliance trend we should be aware of as we head from 2022 and beyond.

Brian Hamburger 03:42

I think the biggest trend that we're seeing is, is that the SEC is finally begun to mobilize, engage in rulemaking engage in meaningful enforcement in, you know, and take a real pro consumer stance. Now for RAS for independent RAS. That's, that's not a bad thing, right? It's, you know, it's because their interests are so aligned with that of the consumers, but they do have to be mindful that we're dealing with an SEC, who is who's on the path, right, they are going to be working towards ensuring that advisors are minding their conflicts of interests, that they're disclosing them appropriately, avoiding them, you know, when, when possible. And there's been a little bit of creep in the industry, right? We have advisors who, over the years because we've had an SEC that that may have not been as vigilant. They've, they've let some of this stuff go right. So they've they've crept into receiving compensation or having other benefits that are coming in, maybe unnecessarily or if they are necessary, maybe not disclosing them appropriately to clients. So I think for advisors, there's not any one thing that they really need to be afraid of. It's it It's really a holistic message that you got to make sure you're minding your obligations as an investment advisor, you got to make sure that we're dealing specifically with conflicts of interest really well. And supervision is an emerging issue for a lot of advisors that are scaling their business and growing.

Matt Ackermann  05:16

Absolutely, such great insights always great to chat with you my friend. So it was fun to be here my friend appreciate a for advisor pedia. I'm Matt Ackermann.