Where were we 10 years ago when compared with today, and what are the implications for the next 10 years?
It was asked and answered by David Reich at Excel 401(k): The Advisors’ Conference in Dallas on Monday afternoon.
During the presentation, aptly titled “History Repeats Itself, Again—Lessons From Top Advisors,” Reich, National President, Retirement Services with HUB International, called it “back to the future” in the area of advisory firm consolidation.
“If you look back 10 years, people said it’s going to happen, but from a structural perspective, I think people are underwhelmed by the amount of change.”
While acknowledging consolidation in the record-keeping space, what people said was going to happen largely has not.
But it’s about to, according to Reich.
“It’s warming up, and you’re starting to see some consolidation on the advisor side of the business and certainly on the DCIO side of the business.”
However, he was careful about commenting specifically on multiples, and whether they’re currently under or overvalued.
“Look at the stock market; people always say it’s undervalued or overvalued but it’s really valued the way it’s supposed to be at that particular point in time. I don’t know that the multiples have changed that massively. They’ve probably gone up a turn in the last couple of years. Will they go down a turn over the next couple of years? Yeah, maybe.”
Sell-side surprises
For advisors, in particular, what’s the biggest surprise once they sell, Reich was asked in a pre-conference interview?
“Every transaction is different,” Reich said. “We talk a lot about the opportunity in the cross-sell. Everyone gets referrals, but no one has really gotten the firehose of referrals that they get from [other Hub business lines].
Another, Reich added, is that “once the advisor completes the sale of the firm, they become better advisors, because now those chips are off the table and they’re not worried about the economics of the business. They’re more about doing a good job. They’re relaxed and comfortable with what they’re doing and actually win more business and can be more successful advisors.”