Q&A with Thomas Prescott of Advisory Services Network
As large aggregators in the wealth management industry grabbed the headlines this year acquiring ever-expanding advisory practices, the Advisory Services Network has grown quietly, adding some $ 1 billion in assets and growing its advisor workforce by 16% compared to 2020. The company, which provides a service and support platform for RIAs, now has nearly 200 advisers and 118 offices across the country.
ASN has adopted a different approach from that of many traditional aggregators; he does not acquire these practices. And the company is tackling one of the most underserved segments of the wealth management industry: smaller advisors. While many aggregators and some of the large depositories have turned away from these more modest practices, ASN has specifically targeted advisers with between $ 20 and $ 250 million in assets under management and has built its services around this. cohort.
WealthManagement.com recently spoke with Thomas C. Prescott, Jr., Founder and Managing Member of ASN Atlanta, about the landscape of small advisors, the evolving childcare market and why its company does not offer upfront money to advisors to join.
The following interview has been edited for length and clarity.
WealthManagement.com: What is the ASN model and what type of advisors are you looking for?
Thomas C. Prescott, Jr .: We’re an aggregator, but not in the vein of those you read the most about, where you have the Hightowers or Dynastys of the world. We take a different tact.
We are not private equity firms; we are a family business. And we don’t buy practices, so we don’t try to aggregate terms that you read pretty much every week or every month in the press. We are a service company.
Before creating ASN, we owned a consulting firm for around 35 years. And so we were construction brokers / dealers. We were building consultants. We did regulatory consultation, expert witness work, etc. We have done projects all over the world. We helped set up Nasdaq Canada. But we saw our business shift from being primarily broker / dealer driven when we launched the almost 100% advisory business, 95% investment advisor focused. In this swing, if you will, for the direction of the business in the financial services industry, we have obviously seen more and more escapees no longer wanting to be part of the broker / dealer community.
We saw it as an opportunity to build a platform. And the platform was really there to deliver services to what I call the underserved market. It’s the under $ 300 million business segment, lower where other aggregators want to play, where they want to buy the companies and get them to join their platform.
We wanted to create a firm that would basically say: âYou come and join ASN. You are self-branded within your communities. Your customers see you, your brand, your logo. We do all the back office, all the compliance; we bring all the technology. We provide all the infrastructure necessary for the proper functioning of a firm.
WM: Do you mainly target the escape advisers of the spinning mills?
TP: We welcome advisors from three segments really: these are communication agencies and bank brokers, then a fair segment comes out of independent brokers / traders. The other segment is people leaving other RIAs or even their own RIAs and joining us now. So it’s the ability for them to join us and continue to promote the brand, to be the portfolio managers for their practice, to be the contact center, and it’s not a sale. It’s important to our guys. It’s not a sale of their book. It’s a way to continue in a more expeditious and cost effective manner.
WM: Do you have a broker / reseller affiliation?
TP: We do not have a broker / dealer, but we do have b / d partners that we work with. But really, we do it as accommodation for our advisers. Maybe 15% of our advisors still manage money on the b / d side.
WM: How does it work when an advisor joins ASN? Are they part of your ADV?
TP: Yes, ASN is the advisor. But under our consulting firm, each of our offices presents itself as a division of ASN. Our representatives, if you will, manage the money. They manage their client. We manage the process. We therefore manage compliance, regulations, operations, custody relationships, technology. Everything behind the practice that is necessary for a successful practice to run smoothly and in a regulatory manner, we provide all of this to representatives.
We have a retention rate of over 88% of the advisors who have already joined us are still with us. It’s pretty impressive considering we don’t buy the practices. We provide a very high end service to a market that is really ignored to some extent. If you have less than $ 100 million in assets, who is trying to buy your practice? So we are here to maintain this model. Our largest advisory group has approximately $ 350 million in assets. Our smallest is about $ 10 million. But our average advisor is probably in the $ 50 million to $ 60 million range.
WM: There has been a lot of talk about the little advisor, especially following the acquisition of TD Ameritrade by Schwab. What is currently happening with the small segment of advisers and why are these advisers being ignored?
TP: We have relationships with the four main custodians (Schwab, TD Ameritrade, Pershing and Fidelity). And when we interact with the gatekeepers, our representatives call us in Atlanta. We do all the operations and all the back office work for them, and we intersect at a much higher level with the custodians. In today’s world you might hear that a $ 30, $ 40, or $ 50 million advisor has to operate through email queues or 1-800 number queues. Our advisors come to us, and we get access to a higher level because of our size and reach.
In today’s world, as I read the market, there is no minimum advisor in terms of assets under management. I think the custodians are looking if this is a profitable practice for the custody company? The market has changed.
For us, that has not changed as we are already a bigger company. If you’re a $ 40 million, $ 50, or $ 60 million advisor, you want to make sure you get good service. You want to make sure you have E&O and all the increments that go into a practice. We have it all, and it’s done at a really economically sound pricing structure.
WM: Have you noticed an increase in interest in ASN following the acquisition of TD Ameritrade by Schwab?
TP: Yes, we increased by over $ 1 billion last year and we increased by over $ 1 billion this year. We manage our growth; we pick and choose the advisors we want to be with us. Like everyone else, we do a lot of diligence in determining who is joining us. We do background checks.
WM: Have you thought about adding new custodians?
TP: We have all four majors right now, and yes, we are adding a fifth custodian this year. I can’t tell who it is yet, because the case is not over. But he’s a big player.
WM: What is the next step for ASN? Do you think you could make acquisitions down the road?
TP: Right now, we are focused on succession planning for our advisors. We have a number of advisers who are older. Either we fit within our system or we help our older counselors find younger counselors to familiarize themselves with their practice and start working with them, so that the transition is smooth over three, five, or three. regardless of the number of years. the owner of the practice wants to continue working.
Will we make acquisitions? Over the past two years we have been shown companies that are for sale. And these are businesses that we could have bought and raised under our banner. They didn’t seem to be consistent with how we wanted to grow the business and how we wanted to continue to run the business. If we saw a practice that made sense, would we? Absoutely.
Large corporations are buying out individual firms so that they are now part of an owned firm, which is not something we have looked at at this point. Clearly this is something we could do if an advisor wanted to sell their home office practice. But we haven’t been asked to do so yet. Our advisers don’t want that; they want to continue to own and manage their practice, whether they are expanding their practice, recruiting new reps, or practicing a lifestyle, which means that they have had their practice for 30 years and that they want to be left alone.
WM: Have you thought about offering capital solutions for your advisers?
TP: We haven’t done it yet, because, again, it’s not something we’ve been asked to do. When a company joins ASN, we do not offer it money up front. We don’t do forgivable loans. People join us because of our service and our pricing structure. For me, the initial forgivable loans are a trap. It has been a trap in this industry for 40 years, 50 years. âJoin us; we’re going to give you $ 200,000 repayable over six years. These guys are now stuck in this practice because they have to pay back the money.
WM: What is ASN’s pricing structure and how is it different from that of other companies?
TP: We don’t make a percentage of the fees. We charge basis points. So there are no hidden charges, whereas the typical competitor says, âOkay, we’ll do it 85/15 or 90/10. And then you pay for E&O and you pay for the technology and you pay for this and you pay for that, the backend fee, the platform fee, if you will. We don’t believe it. We want to be 100% transparent. If you are less than $ 20 million, you are going to pay us 12 basis points, or $ 24,000 per year as a minimum. At 12 basis points, everything we talked about is included. If you get to $ 50 million, it drops to 11 basis points, you get to $ 100 million, it drops to 10. If you get to $ 150 million, you drop to nine, and so on.
What we try to stay away from are hidden charges. You are not going to end up having to pay for your E&O. You won’t have to pay for your Black Diamond, for your compliance software. You will pay for your individual state license or individual state registrations. We pay the firm registrations. It’s really different from what you see if you go on an IBD channel or some of the other channels out there.