Any time a wealth manager makes a series of acquisitions and then embarks on a consolidation process, it’s expected that some advisors will look for homes elsewhere.
And few firms have done more in recent years to buy up large practices and then bring them under the same operating umbrella than Osaic. The independent broker-dealer is now closing in on the final stages of its plan to fuse eight separately acquired broker-dealers by the end of this year.
Large-scale change of this sort is never easy, so it’s little surprise that some advisor teams have chosen to decamp, said Dimple Shah, executive vice president and head of corporate strategy at Osaic. In general, she said, the rate of departures has been about what was expected.
“Anytime you have a change like this, it’s an opening for competitors to pitch themselves, and obviously we sit in a very competitive environment,” Shah said. “We did have some advisor attrition. But I would say it was in line with what we’ve modeled.”
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On the plus side, Shah said Osaic has completed 90% of its consolidation process — which it calls its “Journey to One.” Shah said the necessary changes involve much more than placing the Osaic brand on the firm’s eight formerly separately named broker-dealers: American Portfolios, FSC Securities, Infinex Investments, Royal Alliance Associates, SagePoint Financial, Securities America, Triad Advisors and Woodbury Financial Services.
More than 11,500 advisors have had to be moved onto Osaic’s digital systems, and the reams of data they generated in their previous practices have had to be converted into the same format. In return, the advisors will benefit from a consistent set of regulatory and compliance policies, stronger connections with their colleagues throughout the firm and more opportunities to hand down their book of business internally when they are thinking of retiring, among other things. They can choose to be affiliated with Osaic under an independent brokerage, RIA or institutional business model.
To most advisors’ relief, Shah said, the consolidation has not entailed any need to “repaper.” This laborious documentation process often has to happen when advisors change the third-party custodian they use for safeguarding clients’ assets.
“So that part of the operational transition has been seamless, which is not what advisors experience if they go to another competitor, obviously,” Shah said. “So we tried as much as possible to eliminate as many friction points as we could. But that said, it is still change, right?”
With the consolidation almost complete, Osaic has one more hill to climb before its brand unification journey will be over. Osaic announced plans last December to buy Lincoln Financial Group’s wealth management arm for $700 million, a deal that was completed early this year.
That acquisition brought on roughly 1,400 advisors and $115 billion in client assets, pushing its total AUM to more than $653 billion. Lincoln’s former financial services arm has been renamed as Osaic FS and its advisory arm as Osaic FA, and the integration is expected to be completed early next year, Shah said.
Many of Osaic’s more recent acquisitions have been financed with cash from its private equity owner, Reverence Capital Partners, which bought a majority stake in the firm in 2019. Looking to the future, Shah said she expects Osaic’s next phases of growth to come from advisors building their books of business and the recruitment of external advisory teams, rather than more M&A deals.
For now, completing the consolidation is the priority. Shah, who joined Osaic in 2022, when the firm was still called Advisor Group, recently sat down to talk to Financial Planning about Osaic’s growing pains and triumphs and what comes next.
This conversation has been lightly edited for brevity and clarity.
Financial Planning: What was the main impetus for this consolidation?
Dimple Shah: When I came in, we asked ourselves: How do we want to position ourselves for success going forward in the next phase of the company? And trying to do that with a highly fragmented operating platform becomes very challenging.
It specifically becomes very challenging to be at the forefront of innovation when you have to run everything through eight or nine different account-opening systems or six or seven or eight different client-management systems. So, from an operational experience, it becomes friction-filled for our advisors to continue to think about operating in that way.
The other part was to make it easier for our advisors, with the impending transfer of wealth and succession of advisors, to look at merging or acquiring books across the Osaic network. With the over 11,000 independent financial advisors that we serve, and knowing that over 55% of them are going to be thinking about the next stage of their business in the next 10 years, that’s a huge opportunity. So, how do we facilitate the transition of those practices?
Formerly, our advisors really only knew advisors within their original broker-dealer. And if they were to acquire another advisor, they would often have to repaper. So there was a lot of friction.
FP: It’s probably safe to assume that many of the advisors at Osaic are there because they wanted some degree of independence from a large firm. How do you maintain that sense of independence amid so large a consolidation?
DS: The vast majority of our advisors are 1099 independent advisors. We did recently launch a W2 employee channel, but that’s very nascent.
So almost all of the advisors that we serve and support are still independent advisors affiliated with Osaic Wealth. The question then is: What is their sense of community, so they don’t just feel like they’re in a sea of 11,000 advisors?
The answer for us is: When you look at the future, it’s not about advisors identifying with other advisors based on a broker-dealer construct or an RIA construct. We really believe that all those lines are blurring, and that advisors don’t define their business through those lenses as much anymore.
The lens that they tend to define themselves more through is: What is the structure of my business? Am I an enterprise? Am I an ensemble? Am I a solo? So that’s one dimension.
The second is: What kind of clients do I serve?
And then the third is more the affinity lens. Which is: How do I connect with others? As an example, maybe I’m a woman-led business thinking about attracting more women investors.
So the pivot that we’ve made over the past year is really creating and defining community much more by the advisor business model and what they’re seeking to accomplish from a strategy perspective.
FP: What’s been hardest about the consolidation?
DS: I mean, we’re talking, in some cases, about completely disparate firms from an operational perspective. So when you look at a firm like Securities America, and its operating infrastructure, the platform, the data structures, the data tables, it was all totally different. Our team running the integration has had to try to dissect and decipher all of that in very short periods of time.
And they’ve done a miraculous job of creating 1,000-line run books to try to make these conversions go as seamlessly as possible. And, for the most part, we’re proud of how they’ve gone. We feel like there were definitely lessons learned.
With some of the firms that had more disparate systems, we obviously had some bumps and bruises that we’ve learned from. We feel like each conversion gets better and there’s less friction for the advisor. And they’re able to kind of walk out of the office on a Friday, we do the conversions over weekends, and then they come in Monday and can be up and running as quickly as possible.
FP: Have you offered advisors retention deals to give them an incentive to not leave for competitors during this transition period?
DS: We did not have a structured retention program for this, partly because the advisors didn’t have to repaper. We didn’t feel that it was at the same magnitude of change as when advisors are acquired and are changing wealth firms. Obviously we have business-as-usual retention offers as do all firms, but we didn’t have a programmatic retention program that went alongside Journey to One.
FP: You’re talking to me from Orlando, Florida, at ConnectEd, Osaic’s national conference. What’s the general sentiment among advisors you’ve met with in the past few days?
DS: It’s been really energizing for us. It has been a hard year just with the volume of work. It’s been hard on our employees. There’s been a lot of change for our advisors.
But I think everybody sees the light now in terms of: We’re almost there with Journey to One. Now we’re really starting to turn the corner and talk about some of these new opportunities both for our advisors and for the firm.
We have over 1,000 first-time attendees at the conference. And people are saying: I knew what my former wealth management firm had to offer. But now I’m part of this bigger family of Osaic, and I really want to understand better and, probably most importantly, get connected with advisors.
And there’s a couple of big areas that we’re really focused on. One is advisor education and development. And that’s where our Wealth Advisor Academy comes in. Its target focus is people with 10-plus years of experience. Perhaps they have an established book, but they’re trying to figure out how to get it to the next level. We have a structured, hands-on curriculum around comprehensive wealth management. We’re doing that program in cohorts of 20 to 25 advisors that meet monthly so that they have a group of peers that can hold themselves accountable to monthly milestones and metrics.
The second big piece is all around holistic wealth management. So one of the capabilities that we’re really excited to build on came to us through Lincoln Wealth. It’s called their National Planning Institute. It involves deep and rich expertise that make it easier for advisors to not just create financial plans, but also really tap into the holistic wealth needs of their clients and get support particularly for working with that ultrahigh net worth, or upper end of the high net worth marketplace.
And then the third piece comes back to what we talked about earlier — connecting advisors, maintaining this heritage of entrepreneurialism and helping advisors learn from each other.
