Your Industry Is Buying Mine
Ten years ago, almost nobody asked how an independent Registered Investment Advisor (RIA) firm was built. Now I get the question much more frequently, which makes sense given what most of you do for a living.
Private equity is buying RIA businesses, investing in the infrastructure underneath them, and increasingly selling into the wealth channel.
Let me take them in order.
#1 - Buying RIA Businesses
The demographics tell an interesting story. Cerulli Associates estimated that 35% of financial advisors, managing 40% of industry assets, plan to retire within the next ten years, and that more than a quarter of them are uncertain about their succession plans (Cerulli).
The pipeline behind them is thin. Cerulli reported a rookie advisor failure rate of more than 72% in 2022 (Cerulli).
So you have an aging owner base, a thin talent pipeline, and a large share of firms where nobody knows who takes over.
Schwab's 2025 RIA Benchmarking Study found client retention holding at 97% across the decade from 2014 through 2024. Worth noting that the study draws on self-reported data from roughly 1,300 firms that custody with Schwab, so it is a slice of the industry rather than all of it (Schwab).
Recurring revenue, near-total retention, unresolved succession plans, and a demographic clock. That combination is what the investors are responding to.
#2 - Buying the RIA Infrastructure
The second is investment in the infrastructure rather than the firms themselves. To see why, it helps to know how the machine is actually built. Axiom is the RIA. It is the registered entity, it provides the advice, and the advisory relationship is with us rather than with any of our vendors. Nearly everything else in the stack is a vendor decision.
Custody comes first. Client assets have to be held somewhere, and for us that is Charles Schwab. By contrast, at many large broker-dealers, custody and advice sit within the same corporate ecosystem. Ours do not. Schwab holds client assets, but it does not own Axiom. If the custodial landscape shifts, we can evaluate the alternatives and recommend a move to clients if warranted.
Then investment implementation. A custodian holds assets, but you still need a way to invest them. We build portfolios using evidence-based, low-cost vehicles, primarily ETFs, and we use separately managed accounts where a client's situation calls for one. There is no proprietary product. We receive no commissions or revenue sharing on any products we select. When we change a building block, the question is whether it better serves the client.
Then planning. We use Libretto to connect the portfolio back to the client's total financial life. That is where the liability-matching framework comes to life: what a client will need, when they will need it, and how much risk is appropriate for the specific dollars supporting each of those needs. Our choice to work with Libretto is built around who we serve.
Then reporting, which is where all of it has to come back together and become legible. Black Diamond shows clients how accounts are allocated, how they are performing, and where that performance is actually coming from.
Now look at that list again. Every one of those slots is a business. Someone sells custody, someone sells the planning software, someone sells the reporting. We have seen private equity take an interest in many of those verticals.
As an operator, our job is not to manufacture every component. It is to decide which components belong in the system, how they fit together, and whether each one is still a fit for the clients we serve.
But the infrastructure is not the point. It exists so the real work can happen: tailoring a portfolio to what a client actually needs, planning around a carry event, working through a liquidity question when a fund is three years past its expected exit, coordinating between the attorney and the accountant who have never spoken to each other, bringing new ideas to the table. Most of all, being a thought partner to the people we work for.
#3 - Selling to the Wealth Channel
The first two cover the ways private equity is buying into my industry. The third is private equity selling into it.
As the fundraising environment has gotten more challenging, the private wealth channel has attracted a lot of attention as a new source of capital. But raising capital from individuals is not the same business as raising from institutions.
Distribution turns into a headcount exercise. The wealth channel means wholesalers covering territories, advisor by advisor. Check sizes are a fraction of institutional commitments, which means you need far more investors to fill the same fund.
Education is paramount. Many individual investors are less familiar with private market structures, so you have to build comfort with both the end client and the advisor sitting next to them.
And liquidity is the hard part. Institutional LPs build around long lock-ups. Individual investors have personal liquidity needs that can be much less predictable. A divorce, a health event, a house, a tuition bill. Evergreen and semi-liquid structures exist to address that, which is part of what separates them from the traditional drawdown model.
None of this means the wealth channel is a bad idea. It’s just a different one. And that is really the broader point. Private equity is interacting with the wealth management industry from several directions at once.
Some of you invest in financial services. Some of you invest in the technology and infrastructure underneath it. Some of you are looking at the wealth channel as a place to raise capital. And some of you may just be interested enough that you made it this far in the email.
Regardless of where you sit, I hope you came away knowing a little more about how this industry is evolving.
Important Disclosures:
Axiom Private Wealth, LLC ("Axiom") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Axiom and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. The views expressed in this commentary are subject to change based on market and other conditions. These materials may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Past performance shown is not indicative of future results, which could differ substantially. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss. Diversification does not ensure a profit or guarantee against loss. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Axiom's strategies are disclosed in the publicly available Form ADV Part 2A. Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations. Investments in emerging or developing markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.
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