At its annual conference this week, Osaic rolled out several capital-raising options for its advisors, ranging from personal credit lines to performance loans, for what one senior executive called the advisors “in the middle” who are looking to grow.
“As an industry, I think we’ve done really well by advisors in providing capital for advisors who are in transition and for the M&A succession side of it,” Kristen Kimmell, Osaic’s executive vice president of development, said on the sidelines of the conference. “Those are two big moments, don’t get me wrong … but [advisors] really spend a big portion of their career in the middle, and sometimes a challenge they’re dealing with.”
Kimmell had presented the suite of capital options available to Osaic’s roughly 11,000 advisors on the main stage on the first day of the conference, which was held in San Antonio. The broker/dealer also had panel discussions on the topic with top executives and had a table at the conference called “Capital as a Catalyst for Growth.”
Kimmell said the firm designed the program during its so-called Journey to One integration, a multi-year program to pull together its formerly disparate broker/dealer group. Now, as it’s presenting to its base as one cohesive firm, it can offer either direct lending from Osaic or options through third-party lenders.
“I think sometimes people think capital is risky debt, or just that part of it, and it isn’t,” Kimmel said. “It’s a tool that can be used, and it can take different forms.”
Osaic divided the offerings into four options: securities-backed personal credit lines, fixed-rate term loans, working capital credit lines and performance-based loans. On the main stage, Kimmel said that about 20% of Osaic’s capital has been deployed to such initiatives and that the firm wanted to do more to support “growth initiatives.”
The focus on capital comes as the wealth management sector faces a dual strain of older advisors looking for succession paths and firms in growth mode looking to boost organic growth. Osaic, itself backed by funding from private equity firm Reverence Capital, highlighted different uses for capital, such as creating lead generation or expanding capacity to serve more clients.
“Capital and liquidity can be used for marketing, for client events that can help you increase the share of wallet that you have with your existing clients, or help you acquire new clients,” Kimmel told the audience of advisors.
She also mentioned technological upgrades, real estate expansion, and ways to help fund second-generation ownership stakes.
On the sidelines of the conference, Osaic President and CEO Jamie Price said the firm’s newly evolved affiliation options, including its W-2 and RIA channel options, have made capital sharing a more realistic fit as advisors consider options. He also noted two sets of advisors where he is seeing “hands being raised” for capital in what he said was a roughly $48 billion pipeline.
One is aging advisors whose firms’ valuations are so high that it’s hard for the younger generation to buy in. In these cases, Osaic can take an ownership stake or buy out the firms if it’s the right fit.
“We don’t want to run these businesses,” he said. “We have to do it where there is a partner or a clear succession plan. And if there isn’t a clear succession, and it’s in a good wealth market … we can find someone to come into the practice.”
On the other hand, he said, are next-generation advisors who don’t want to deal with the infrastructure of running a practice but focus on the client side. Price said Osaic will offer to run the infrastructure in these cases while leaving an equity stake to “keep them engaged longer term.”
Regarding the pipeline of interest, “about a third of them are young advisors,” Price said. “They are more interested in being holistic wealth managers, and they want to grow, and they want to do everything to outsource everything to keep them from growing.”
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