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Steven Tenney

Practice Management > Building Your Business

More Advisors Breaking Away to Serve Retirees: CEO

By John Manganaro

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What You Need to Know

  • More financial advisors are breaking away from wirehouses to better support clients' retirement planning needs, Great Diamond Partners CEO Steve Tenney says..
  • Product and service options are limited at wirehouses, says Tenney, a former UBS advisor.
  • One challenge facing independent advisors is the natural propensity to chase every new opportunity.

Financial professionals dedicated to serving middle-class and mass affluent clients focused on preparing for retirement say there has never been a better time to be in the business — nor a better time for their practices to be part of an independent RIA.

In fact, according to Steve Tenney, the founding partner and CEO of Great Diamond Partners, there is a notable groundswell of financial advisors growing weary of operating their advisory practices within the traditional wirehouse and banking channels. This is due to what Tenney and others refer to as “anti-competitive barriers” that are stymieing innovation within the wirehouses and big banks.

“When you are at a wirehouse, you are captive in terms of the products you can use and the approach you can take to serving your retirement clients,” Tenney recently told ThinkAdvisor. “There’s no internal competition with respect to the products and platforms you can utilize, and in my opinion, that [hurts] pricing and service quality when you are trying to deliver objective financial plans.”

Tenney’s own practice has been operating independently for nearly four years, he explains, following a 26-year stint at UBS and its predecessor organizations. Currently, Great Diamond’s client service and investment operations are supported by the rapidly expanding independent wealth management platform Dynasty Financial Partners.

Through Dynasty, independent advisors have access to a full array of capital market and investment banking capabilities, as well as a substantial range of investment research and consulting tools, Tenney says. Other benefits include access to advanced retirement planning technology and proprietary analytical tools, and an online research center.

Echoing sentiments shared recently by other breakaway advisors, Tenney says the wirehouses and big banks remain an important part of the advisory ecosystem, both for the scalable services they deliver to the marketplace and for their ability to help new advisors build out a book of business. But when it comes to serving the complex and evolving needs of retirement savers and other groups of clients in a fiduciary-first capacity, Tenney says, captive teams cannot match the abilities of today’s independent RIAs.

 A Maturing Industry

Reflecting on the process of breaking away from UBS, Tenney says the firm provided a great setting for the steady buildup of a sizable book of business, but over time, as he secured more clients who were well established in their own careers and looking for support with holistic wealth and retirement planning needs, it became clear that there could be a better way to do things.

“To be specific, I began to feel that there could be a better way to engage with clients in a more product-agnostic manner,” Tenney recalls. “The planning needs of the typical pre-retirement client are not just about pairing them with specific funds or insurance products. What they need is a holistic plan and an independent point of view. They need a true financial partner.”

Tenney says more advisors are considering independence in 2023 both because they want to serve their retirement clients differently and because the support ecosystem available to independent firms has been rapidly improving over the last decade.

“The whole independent ecosystem that has evolved so much, and for the better,” Tenney says. “All the parties have improved the way they can support independent advisors — the custodians, the lenders, the investment platforms, etc. The competition among these support organizations is really strong, and that is having a phenomenal impact on firms like ours.”

According to Dynasty’s own internal survey data, advisors who have recently made the transition to independence say they now have a greater opportunity to build equity value in their business after becoming independent RIAs, and they broadly report having more control over their business decisions.

Newly independent advisors who have undergone such a transition, according to a Dynasty survey of breakaway advisors in its network, are often able to convert more than 90% of their assets from their prior firms, while more than half are able to transition 100% of their assets. The vast majority of polled advisors say they now have better relationships with their clients since transitioning to independence, as well.

The Biggest Challenge for Independents

Tenney says he feels “empowered and unleashed” as an independent business owner, suggesting that his firm is in a “pretty ideal situation” given the support it gets from Dynasty without having to compromise on its client service approach or business development philosophy. The main downside to the current approach, Tenney says, is the danger of falling prey to “Shiny Penny Syndrome,” given his firm’s more limited financial and staffing resources.

“Honestly, that’s the biggest challenge for me as a CEO,” Tenney says. “There are so many directions that we could move, and that fact requires us to be very strategic about the decisions we make and how we deploy our limited time and resources as a firm.”

To address the issue, Tenney leans on his executive leadership team to develop and deepen the perspective about what new opportunities to pursue and when. He specifically credits the firm’s president and chief financial officer, Helen Andreoli, for her ability to help put new opportunities in their proper context.

“Another key to our approach is that we have formalized a long-term vision that gives us a sense of direction in terms of where we want to be in eight or 10 years,” Tenney says. “This longer-term outlook is complemented by additional three-year and one-year goals. These plans are all interrelated, so it gives us a clear pathway forward.”

An Anecdotal or Demonstrable Trend?

The breakaway dynamics described by Tenney are explored in Echelon Partners’ latest RIA M&A Deal Report. The report offers some data to contextualize the firm leader’s anecdotal experience, showing wealth management deal activity defied 2022’s global slowdown in mergers and acquisitions.

Despite challenging macroeconomic conditions, buyer competition remained high, and consolidators continued to deploy capital throughout the last year, buoying both transaction volumes and valuations. By the end of 2022, the wealth management sector managed to avoid the broader M&A market slowdown, which was driven by rising interest rates, geopolitical uncertainty and tightening monetary policy.

Echelon’s report emphasizes Tenney’s point about the growing importance of platforms like Dynasty Financial Partners and its peer organizations. As the report spells out, the increase in the number of platforms across the wealth management industry has created a dynamic where private equity-backed firms are seeking to expand their offerings by acquiring smaller firms that can be strategically integrated into their existing platform, in turn boosting demand for add-on acquisitions.

As part of a larger, more established platform, sellers can tap into a wider range of resources, technology, expertise and access to capital, Echelon reports. This allows breakaway advisors to effectively bolster their competitive position in the wealth management marketplace and rapidly expand their business in ways that would be difficult to achieve with a traditional approach to independence.

Looking to 2023 and beyond, the Echelon report estimates it is likely that this trend will continue to shape the wealth management landscape for years to come.

How to Serve Retirement Clients Well

Reflecting on his own firm’s process, Tenney says the key part of the service model is ongoing one-on-one education and deep planning sessions with clients.

“It all starts with a deep discovery meeting where we explore and learn about their values, history, hopes, challenges, relationships and resources,” Tenney says. “This discovery serves as the foundation for our ongoing relationship and allows us to educate the clients in a manner that is specifically tailored to their needs. The timing of these discussions can start decades before retirement and get more specific as the retirement date approaches.”

When preparing to retire, Tenney says, it is common for clients to underestimate all of the issues they should address. For example, for those who sold a business, they now need to pay for expenses that used to be covered by the business. Just as important is the tendency for clients to struggle emotionally as they try to define their new identity and where they should spend their time.

“For many years their identity was wrapped up in their job or their business,” Tenney says. “For most people, just stepping away and spending more time golfing is not the answer. We can help our clients craft both the financial and the personal picture as they enter retirement.”

With respect to building the actual retirement income plan, Tenney says, most retirees feel perfectly comfortable with leaving the distribution methodology to the firm. In building the spending plans, the firm looks primarily at the tax efficiency of distributions and long-term objectives.

“Taking the minimum from retirement accounts often makes sense as a starting point, although more sophisticated approaches are often in order,” Tenney says. “For example, one client we recently worked with agreed to liquidate their Roth IRAs due to the tax-free distribution. This, in turn, allowed their taxable unrealized gains to remain untouched.”

(Pictured: Steven Tenney)

John Manganaro

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