Will innovation beat consolidation in the RIA space?

Two RIA trading specialists squared off Sunday at the inaugural Future Proof conference in Huntington Beach, Calif., in front of several hundred advisors and other attendees. – revealing essential information about the state of the wealth management industry and its direction.

The debate featured David DeVoe, CEO and founder of consulting firm RIA DeVoe & Co., and Brian Hamburger, CEO and President of MarketCounsel and Chief Counsel of Hamburger Law Firm. Ian Wenik of Citywire RIA served as the discussion moderator.

When asked when RIA’s 12-15 largest acquirers could dominate overall business which brings together nearly 15,000 investment advisory companies Hamburger said, “They’ll never get there because of the creative trend in the wealth management industry and the low barriers to entry.”

Filing the required registration form with the Securities and Exchange Commission, for example, is not very demanding, he explained.

In DeVoe’s opinion, there are about two dozen companies he has called “meta-acquirers.” They may be “remodeling RIA [industry] records, but they’re not reshaping the industry – yet they’re consolidating quickly and are happy to acquire like crazy,” said.

These meta-acquirers, according to DeVoe, are better than the average small RIA at managing customer relationships.

He points to Edelman Financial Engines as a big company that has spent around $10 million on technology to help generate leads. It generated around 100,000 leads last year and produced around 150,000 this year.

This great RIA “does things differently,” DeVoe explained, “and is therefore able to grow in ways you can’t imagine.” (He called these growth strategies “meta-techniques.”)

“I’m not buying it,” Hamburger replied. Big companies “may be doing more things right than other companies, but other companies are still nimble.”

In other words, the biggest RIAs are “companies and that means they take longer to develop innovation,” which should serve to limit industry concentration, he said. . Moreover, the number of large acquirers is likely to remain between 12 and 15, Hamburger pointed out.

Private Equity Matters

What about private equity and the negative impact it could have on the RIA space?

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