Texas-Based Advisor Platform Sees Plenty More Room For Growth In Business Model

Tom Burroughes

5 May 2017

Austin, TX-based Kestra Financial, an independent advisor platform, recently added a group of firms into its embrace, including The Strategic Wealth Management Group, a financial and investment advisory firm, and Dudum Financial, an employee benefits and financial services firm, and chief executive James Poer is convinced there is plenty more growth left for his business model.

The firm is the kind of business that sees large opportunities in a sector having to adjust to regulatory demands, changing client needs and the benefits of new technologies.

But while ambitious, Kestra is very choosy about the kind of firms it brings onto its platform, Poer told Family Wealth Report in a recent call.

“We’re not trying to shovel bodies into this company. We want to have more trained financial advisors with established clientele,” he said.

The firm works with around 1,700 advisors across 500 to 600 firms. Over the past five years, Kestra has clocked up double-digit growth in revenues, he said.

Such growth is happening as trillions of dollars of wealth is expected to change hands between the Baby Boom generation and its offspring. “Overall, I am excited about the growth of wealth in our nation,” Poer continued.

“The US wealth management is constantly consolidating and fragmenting,” he said, referring to the parallel patterns of some firms joining hands to win economies of scale - often unavoidable because of compliance costs – or as founders retired and sell up - while there are also firms being established by breakaway teams from the larger wealth shops.

The arrival of Dudum Financial onto Kestra’s platform, bringing over $140 million, is an example of how financial advisors are working with partners so the former can focus on advice and building up new client lists, not fretting about back-office chores. With new RIAs springing up seemingly every week, the need for firms they can partner up with is growing. This news service has in the past spoken, for example, to the likes of Vantage Private Wealth, which used the services of TruClarity, a business providing advisor clients with a transition service spanning technology, compliance, research and marketing. Familiar names such as Fidelity and Charles Schwab , to give just two, work with RIAs in providing much of the backup they need so they have confidence to go it alone.

Kestra has had a brisk start to 2017. As well as the Dudum and The Strategic Wealth Management Group arrivals, the first quarter saw the addition of Intrinsic Mutual Advisors and Stone Beacon Capital.

Based in New York, Intrinsic focuses on the investment needs of high net worth families and business owners. Stone Beacon Capital is headquartered in Carlsbad, California, and operates a financial planning practice specializing in servicing the golf industry.

Recent evidence shows that in areas such as the registered investment advisor space, M&A deals have risen strongly, underlying Poer’s point about changes roiling the sector. According to a Charles Schwab survey issued in September last year, there were 52 deals in the first half of 2016, surging 41 per cent on the same period a year ago.

Fiduciary angst
And, inevitably, FWR had to ask Poer what he thought of the current controversy about the Department Of Labor Fiduciary Rule , and the push to encourage fee-based advice. Poer said the industry is on the whole moving towards a fee-based approach.

“It helps to get the bad guys out of the business, of course,” he said.

“The fiduciary rule is the right idea delivered in my view by the wrong regulator,” he said. “I believe it should be delivered by the SEC and not the DoL as it doesn’t deal with all components ,” he said. He favors the idea of keeping open choices for investors in paying fees or commissions and argues that regulators should focus as much as on enforcing existing rules as creating new ones.