Broker Dealers Cambridge, Diversify Move Further Into RIA Channel

Also Tuesday, Diversify Advisor Network, which was recently launched by independent broker-dealer DFPG Investments, announced the acquisition of three Utah-based wealth management firms that will form the basis of a new RIA affiliation model. The new structure, Diversify Wealth Management, will welcome advisors onto what it is calling its partner platform, where they will become W-2 employees and take an equity stake in the firm.

“With the launch of Diversify Wealth Management and the acquisition of these three great practices, we’ve wasted no time executing our strategy of developing a multiplatform affiliation model—and there are more coming,” says Ryan Smith, co-founder and CEO of Diversify Advisor Network. “We are focused on giving advisors choice and flexibility, in a boutique environment with institutional-quality resources.”

The RIA channel is the fastest-growing segment within wealth management and is expected to account for more than 30% of total advisor head count by 2027, according to Stephen Caruso, a senior analyst with Cerulli Associates.

“The abundance of opportunity in the RIA channels has created multiple avenues of entry for independent broker-dealers who want to broaden their appeal by offering a fee-only or RIA-based platform for advisors,” Caruso says. “IBDs looking to jump into the space have found success by building platforms that can leverage the resources of a broader financial-services firm while providing the RIA infrastructure that advisors are looking for.”

That’s essentially the promise of Cambridge’s new BridgePort RIA. The fee-only advisory firm is catering to smaller advisor practices with a similar value proposition as the large RIA aggregators offer: support for functions such as technology, business consulting, and succession planning.

“We created BridgePort with the smaller RIA business owner in mind,” says Jeff Vivacqua, Cambridge’s president of growth and development. “[F]or many firms that fall into this category, it may make sense to streamline operations and accelerate their growth pattern by becoming part of a larger group.”

Cambridge has brought on industry veteran Eddie Rollins to serve as managing director of the new entity.

BridgePort’s focus on smaller RIA firms will give it ample opportunity for acquisitions, according to Lisa Asher, a strategic advisor with the wealth management team at the research firm Datos Insights. She notes that roughly 4,000 of the 15,000 RIA firms registered with the Securities and Exchange Commission have assets in the $50 to $250 million range.

“The IBD market is already consolidated compared to the RIA market, so the RIA space is more attractive for growth opportunities,” she says. “For a firm that’s looking to acquire five to 10 more firms this year, there’s plenty of opportunity.”

Diversify Wealth Management launches with the acquisitions of Caliber Wealth Management, FirstPurpose Wealth, and Diversify, Inc., which collectively manage about $2.1 billion in assets. Those acquisitions bring the Diversify Advisor Network’s total asset count to more than $7 billion across its three platforms: DFPG Investments, a full-service independent broker-dealer; Diversify Advisory Services, an independent RIA; and Diversify Wealth Management, the new employee RIA.

“While Diversify Wealth Management advisors are technically W-2 employees, they aren’t assets to us in some roll-up strategy,” says Stuart Matheson, chief strategy officer with Diversify Advisor Network. “They are partners with significant equity stakes who are truly aligned and carefully selected.”

Diversify’s new W-2 model echoes other similar affiliation models that have sprung up in the industry, including LPL’s employee channel. Other IBDs including Kestra and Commonwealth have reportedly been considering opening similar employee models.

That could become a more compelling proposition in light of new regulatory developments. On Tuesday, the Department of Labor announced its final rule on independent contractors, which will re-establish a multifactor test to determine when a worker should properly be classified as an employee, an initiative that business groups like the Financial Services Institute, which represents IBDs, have resisted.

FSI President and CEO Dale Brown says his organization is still reviewing the rule, but expressed concern that it could broadly restrict a popular labor model in the IBD industry.

“We fear the DOL’s final rule will undermine our financial advisor members’ independent contractor status,” Brown says. “If they are forced to be employees, this could adversely harm Main Street Americans’ access to their local trusted financial advisor.”

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