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Knowledge Bank

Financial industry news and events for RIAs.

5 min read

SYNERGY24: Lessons in Entrepreneurship, Sourced from Decades of Success

Jul 1, 2024 1:26:04 PM

MarketCounsel President and CEO Brian Hamburger and TradePMR Chief Legal Officer Charles "Chaz" Reiling discussed some of the most pressing topics for today’s wealth professionals during the SYNERGY24 conference in Las Vegas. 

When advisors make the leap to independence, they face a world of possibilities and challenges.

Each transition is different. But when done with intention, foresight, and proper counseling, It is possible for advisors to evolve into successful business leaders, accomplished CEOs, and industry-leading entrepreneurs. Hopefully, they can attain the lifestyles and legacies they’ve dreamed of.

MarketCounsel President and CEO Brian Hamburger and TradePMR Chief Legal Officer Charles "Chaz" Reiling have had a front-row seat, and an active hand, in the growth of the RIA segment. In a wide-ranging conversation presented at TradePMR’s SYNERGY24 conference, the two discussed the importance and pitfalls of business valuations, the fine art of talent acquisition, and the subtleties of cybersecurity.

The Benefits and Risks of Business Valuations

With a rise in the availability of business valuations, it’s becoming easier and more common to get insights into the worth of an RIA. But business owners should also be aware of unintended consequences when obtaining a valuation.

Hamburger described a scenario where an advisory firm, motivated by curiosity, obtained a business valuation. The valuation was far more than expected, and a minority partner opted to cash out of the firm on the spot.

This unexpected separation in ownership underscored the need for care and discretion when obtaining a valuation, said Hamburger. While attorney-client privileges are subject to certain limitations, undertaking the process with a law firm and with defined business objectives can offer more protections for ownership.

Breakaways and the “Acquisition” of Talent

When it comes to breaking away, an increasing number of firm structures and business models means every new advisory firm has a different path to independence, said Reiling.

“Each of these transitions will have certain considerations,” he said on the SYNERGY stage.

Weighing the steps required to go independent as a solo practitioner, compared to a team, or just part of a team, is a very intricate exercise. There is no one-size-fits-all, Reiling added.

Moreover, it’s a process playing out in a highly competitive landscape. Over the next decade, 37% of the advice workforce is expected to retire,1 resulting in a potential scarcity of well-trained advisors.

As they compete for talented advisors, RIA firms are turning on one another, said Hamburger. They’re also taking a firmer stance on letting talent leave, even as they bolster their onboarding programs and work to align compensation, career trajectories, and protect their trade secrets and books of business.

From a legal perspective, it’s vital to have a solid, enforceable legal agreement and compensation plan, according to Hamburger. Certain restrictive covenants, like non-solicitation and non-compete agreements, can still be enforced, and they’re critical factors when weighing a merger or an acquisition, he said.

Cybersecurity Starts with Training

Digital security is less about technology and more about trust and user capabilities, said Hamburger. When they begin running an organization, advisors often find that their colleagues will have different attitudes and aptitudes around technology. One thread tying it all together, however, is the importance of proper training and discipline.

Advisors are particularly savory targets for bad actors, according to Hamburger. If a client email account is breached, it’s easy for a hacker to see the business and financial networks of an individual, ultimately, possibly enabling them to take advantage of the air of familiarity that advisors promote with their clients.

Advisors can set the tone for cybersecurity early in their client interactions, noted Hamburger. Clients should be prepared to identify themselves when contacting their advisors, and advisors can make those conversations easier by explaining why they need to undertake such thorough security measures.

Never Make an Even Trade

Entrepreneurs are driven to make a difference, so they should expect a meaningful upgrade on the other side of any change. After helping hundreds, if not thousands, of advisors become independent over the years, Hamburger and Reiling believe change can be beneficial.

“It’s a real challenge for anyone settled in their career to change and evolve,” Hamburger said. “There has to be something that gets better after that change.”

At TradePMR, we’re helping entrepreneurs make tough changes, because we believe, on the other side of that transition, that there’s something better in store.


About TradePMR

For more than two decades, TradePMR has worked with growth-minded independent registered investment advisors (RIAs), providing innovative technology tools and support designed to transform their businesses. The privately-held brokerage and custodian services provider (Member FINRA/SIPC), based in Gainesville, Fla., works to streamline investment advisors' operations through comprehensive custodial, operational, and trading support. For more information, visit www.TradePMR.com.

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1 https://www.barrons.com/advisor/articles/wealth-management-faces-a-looming-demographic-crisis-heres-how-to-avert-it-says-cerulli-0a5df960

Opinions expressed herein are as of the publication date; they are not statements of facts and may include “forward-looking statements” which may or may not be accurate over the long term. Statements, opinions or forecasts not guaranteed. Do not place undue reliance on forward-looking statements. The material has been prepared for or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.

Written by TradePMR