BEVERLY HILLS, Calif.— As clients come to expect more from their advisors, fiduciaries face a mounting tension.
In a panel at the CAIS alternative investing summit on Wednesday, Cetera Holdings chief executive Michael Durbin said that ‘to thrive in this industry over time … you need scale, right? [This is] one of the reasons why some firms find themselves being consolidated, because it’s hard to source that scale on your own. While the industry is, as we said before, at its core, capital light and cash flow heavy, even a company as large as ours cannot be self-financed.’
In order to fund growth and expand their service offerings to meet client demand, most large RIAs have turned to outside capital providers, including — but not limited to — private equity firms. Some would argue that private equity’s involvement – and the fiduciary duty that RIAs owe to their stockholders – conflicts directly with the duty they owe to their clients. But without the growth capital injections provided by these financial sponsors, would RIAs be able to do right by their clients?