Multi-Office RIAs: Scale Advantage or Cultural Disaster?

Is opening multiple offices a path to enterprise value or a recipe for fractured culture, inconsistent client experiences, and eroded margins? In this episode, we explore the real tensions facing growing RIAs — from brand consistency and technology fragmentation to leadership dilution and integration fatigue. Drawing from real-world experience with acquisitions, tuck-ins, and lift-outs, we break down practical strategies to maintain alignment, protect your brand, and turn geographic expansion into sustainable growth. Essential listening for RIA owners and leaders considering or managing multi-office operations.

Disclaimer: 

Avidian Wealth Solutions is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. 

Avidian is neither a law firm nor an accounting firm, and no portion of its services should be construed as legal or accounting advice. 

Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

This information contained herein may be dated.

Transcript

SPEAKER_01 0:06

Jordan,

Introduction: Multi-Office Growth – Scale Advantage or Cultural Disaster?

SPEAKER_01 0:07

today we're talking about the margin squeeze, which is something a lot of RAs experience. And it even though AUM might be up, uh meaning revenues up, they may not see it reflected in the margins. And there's a reason for that. Um we're seeing that uh staff costs are up. They've actually moved up quite a bit. I'm surprised with what we're seeing. Technology, um, not only is the technology expense more, but also you're having to add more tech than ever. And then compliance. Compliance and governance are higher than they ever have been. They've termed it the RIA paradox. So we're seeing growth, AUM's up, revenue's up, but costs are compounding.

SPEAKER_00 0:48

So if revenue is up, but profits feel tighter than ever, what's actually driving the margin

Branding & Client Experience Consistency Across Locations

SPEAKER_00 0:54

squeeze? You know, if revenue and markets haven't collapsed?

SPEAKER_01 0:58

There are several things at work here. So one of them is one that I think everyone has felt, and that's compensation. And oftentimes you don't feel it until you've got to replace somebody or one of your staff gets picked off. Uh, and then you go out to the market and you talk to a recruiter, such as yourself, and you were paid maybe um your CSR, like a common title it's used, maybe $70,000. And uh you'll find out the person you want to hire is being offered $120,000. It's changed a lot.

SPEAKER_00 1:28

Yeah, I I see that. And you know, it it shifts year to year. In 2020, there was a massive, massive inflation and specifically client service, because that was such a difficult role to fill. You know, when we look at the evidence essentially that supports that, Schwab's benchmarking-based comp report shows 23% of total cash comp growth between 2020 and 2024. And I, this is a personal

Why Keeping Separate Brands in Aggregators Often Fails

SPEAKER_00 1:52

stat of mine. I would say what we looked at internally when we looked at all of the roles that we recruited, recruited for between that 2020, 2024 timeline, 50% of all hires that we were recruiting for or open recs that we had were for client service. And their numbers were inflated, I would say one third one third of what it was the years before that. COVID really changed the landscape for that. It has now essentially settled. Um, and we're back to normal market value for that. It was just it's supply and demand. So that kind of um, you know, can can be a part of that. And, you know, we've we have uh Barons with via FP transitions, CFO Eric Liebert, you know, underscores why it stings, right? Compensation can range from 30% to 90% of growth, gross revenue in advisor businesses, but that means that small comp shifts hit valuation and margin hard.

SPEAKER_01 2:46

Yeah, I could tell you from our perspective, your staff is by far your biggest, biggest expense. And if you've got to pay 20% more, you know, I hope your AOM's grown that much. And if it hasn't, now you're eating into profits. And, you know, it's not just that, but I think what we've seen is that as RIAs have gotten bigger, the employees now expect better benefits. So healthcare, 401k, gym memberships, where a lot of small RAs, they never had to deal with that in the past. And now you're out there trying to recruit, and the recruiters are saying, well, this is what these folks, the best, are all being offered. So you've got to match it. So now you've got to change your whole benefits package and employee benefits. It gets really challenging.

SPEAKER_00 3:25

Absolutely. So what I call that in my world is the employee value proposition. What EVP do you have that other firms don't? Because it's gonna be those things that are really driving the needle and making your firm more marketable, more competitive to work for versus um other REs out there. I think the other thing that we saw in the Schwab benchmarking this past year, 2025, was um, or going into 2026 rather, is that incentive-based roles really were essentially parallel to firms that are growing. So when you've got top performers that are getting paid based on incentives, then you've got firms that are growing. And so that parallel was made. And I think I said a hallelujah and sent it to every client I had because this is what I've been preaching for years. But I think when it comes to compensation, that is something to consider too, the incentive pay on top of just base comp.

SPEAKER_01 4:20

Yeah, I think even if you match on the fixed component, um,

Actionable Steps to Fix Brand Inconsistency

SPEAKER_01 4:24

top performers want heavy variable compensation. And the nice thing about it is that is if there's variable compensation to be paid, it means you have growth. You know, you're sharing in the profits on that variable comp. And so it incentivizes more growth. And we see that it really does work. And, you know, if there isn't growth in one year, you have a bad year. Well, you're not having to pay that variable component piece. So I would say getting your staff, you know, one of the solutions is to get that staff more on, you know, performance, variable compensation.

SPEAKER_00 4:57

Absolutely. And I think really tightening role clarity is huge too, because I've seen so often than not that senior level people are doing junior level work. So I think that that's the other thing is really kind of we talk about an active org chart all the time. And I think this really plays into that is org charts should be active in what someone's actually doing. And we don't want a senior level person that is actively doing the role of a junior level person that is sitting on the org chart but not actively doing the job. So delegation is key, and that really kind of cleans up the department too, because do we have too many, too many um, you know, seats in in that specific, you know, um department or not enough. So I think that that's a big part there. So if people costs

Technology Fragmentation: The Hidden Efficiency Killer

SPEAKER_00 5:42

are rising, essentially, why do so many firms still feel understaffed and overloaded?

SPEAKER_01 5:47

Yeah, one of those is the tech stack bloat. Um and, you know, not only do you see redundancies in firms and technology, uh, but you'll see them still operating on old contracts. And I think most folks don't realize that as you grow, you can go back to your tech stack provider and renegotiate. You know, you might have a five-year contract, but a lot of these firms realize that their costs have gone down and they're now signing new contracts at a much lower rate, and they'd rather keep you happy. We've done this multiple times. You just go back midstream and you ask to renegotiate, and oftentimes they will, and you can lower that cost. So you can make some of it up by just watching what you're doing on your tech stack and ensuring that you're not overpaying. You know, some of that you just can't avoid. There's more technology required to do the same job these days, and it's being driven by a lot of the large aggregators who, of course, get scale, but that scale brings an expectation standard among clients, which then expect their advisors to meet that same standard. So then the cost associated is much higher for a smaller firm.

SPEAKER_00 6:54

Absolutely. So a couple of pieces uh essentially that support, you know, Orion's 2025 Wealth Tech survey, and that was across 585 advisors, list that time constraints and too much time on internal tasks in small accounts as key barriers to their growth.

SPEAKER_01 7:12

You know, advisors also expect significant increases in tech investment. They expect that, especially in AI. Now, I think eventually AI will help save the day because you're gonna see that the staff can handle, you know, I don't know, maybe double the number of clients as they could previously. So you can cut the number of hires using AI, but we're not there yet. And it's gonna be years before everyone's ready for that.

SPEAKER_00 7:37

Yeah, I think part of when we did an event last year um with uh, you know, Pareto Systems, I think we that was the number one question is when is AI going to be efficient in this space? Because essentially, you know, AI is great for specific tasks and things, but it's not the go-to for everything, you know, and it's what I hear so many times is that there's so many tech platforms, but none of them are talking to one another the way that they should. And so essentially it's like we were told everything would work together, but nothing does. So we're manually moving data, we're manually having to do duplicate what we're doing in one platform to another.

SPEAKER_01 8:14

So that's the dream. And there are some firms that are saying they've solved that. Um, I saw technology um when I was at a conference the other day that suggested that was an overlay. They would pull all your pieces into one sort of dashboard that you could communicate with. Um, not sure how well it works. We're gonna find out. But I believe that if they haven't solved it, um, we're just a couple of years away.

SPEAKER_00 8:36

Yep, yep. And that that will change, I think, the game overall. So a couple of, you know, actionable items that we can essentially recommend, right? Is

Centralization vs. Autonomy – Lessons from Large Aggregators

SPEAKER_00 8:46

I think the first thing you have to do is a workflow first audit before you do anything else, you know, mapping three critical journeys end to end from onboarding, annual review, money movement as just a few examples, and then identify the handoffs and rekey points, any rekeying, you know, you got to look at the cost, risk, and time involved in that. Um, and really just cutting out the redundancy. If two tools both kind of do the job, then you're playing, paying twice as month much for, you know, not one that is superior to the other. You're not really using either well. Um, and then really picking that one system of record to enforce it. So that CRM or portfolio platform, that you're choosing one source for each data type and integrating outward. Don't let side systems become shadow CRMs. And we see this a lot with oh, we'll make an Excel, we'll make an Excel, let's create a spreadsheet, let's share a spreadsheet. So that happens so often and it's duplicating things. So I think really tighten up that tech stack and so you're not having to duplicate what you're doing. So if people are expensive and tech isn't automatically saving us, what's the third punch to the gut, Jim?

SPEAKER_01 9:53

I hear this one all the time because she walks down our hallway and we see this one compliance. So I I think the RAAs, you know, if you go back and I go back away 20 years, you the regulations around SEC registered or state registered advisors were pretty lax. And I think those who were SEC thought, boy, this is great compared to those FINRA guys. This, you know, FINRA rules are pretty stringent, pretty tough, um, and pretty pretty overbearing. But I think nowadays SEC's caught up or is trying to catch up with FINRA regs. And boy, it's gotten tough. And for larger firms, if you're an aggregator, um, if you do private investments, you're gonna set off flags with the regulators and they're gonna be in your office every few years. So you can be buttoned up and tight uh on all those standards, uh, which we are, but it's a lot of work. We've had to add staff and technology, and um, I think the cost of that overall, the overall cost burden based on the revenue of the firm has just gotten much higher.

SPEAKER_00 10:57

I would agree. I think that you just kind of on that path is what I was thinking. I think the regulatory burden isn't just the risk anymore. It's really the ongoing labor cost, the documentation cost and distraction cost of that compliance actually, you know, it all equals a larger number at the end of the day versus you know what it what it once did. So I think when you look at the SEC has, you know, has highlighted that recurring compliance deficiencies under their marketing rule, as that has become more highlighted, more costs go into it from labor to documentation to even tech platforms to support compliance.

SPEAKER_01 11:33

Yeah. So what are some of the things you could do? Um, create your compliance operating system, not a compliance person. Um, you do need the uh chief compliance officer, of course, but um you need to have written procedures and returning uh recurring testing calendar. Um you need to build it so it survives turnover. Um standardized advertising and review workflows. This is probably the one that weighs down compliance the most because we've got multiple advisors, they all want to have presentations or LinkedIn posts or you name it, and that's all got to be reviewed. Um we're now starting to see AI, at least with the the dream that it can do help do a lot of that for you and offer modifications. Um so you've got to have a central uh library of approved language, or have hopefully today AI that will do that for you. Preview, pre-review checklist for testimonials, endorsements, and and ratings disclosures. Um the other one is budget compliance, uh like a growth function. If you treat it like a begrudged expense, it will always feel like a margin sabotage, but it really can help you grow and expand quicker if you view it the right way. Treat it like table stakes for scalable

Leadership Dilution and Politics in Multi-Office Firms

SPEAKER_01 12:47

growth and MA readiness.

SPEAKER_00 12:49

So, what does a practical margin defense plan essentially look like for the next 90 days based on everything that we discussed? You know, I think ultimately ultimately we have to talk a little bit about what to do with comp inflation, you know, running comp to revenue stress tests, shifting incentives towards enterprise outcomes, stop paying senior talent to do junior tasks, and remember that comp across the rules, it's just inevitably it's up and it's gonna continue to go up. Um, the second thing is with tax tech and integration, workflow first audit from onboarding, review, prep, money movement, and reduce redundancy. I think that's a huge one. Choose one system of record, track ROI and hours saved, not vendor promises. That's really crucial. Um, and then lastly, the compliance complexity there. When you're building a compliance operating system, be strategic about it. Um, and really standardize marketing rule workflows and evidence capture.

SPEAKER_01 13:43

The bar to squeeze isn't a doom prophecy. It's a signal. The industry is maturing, and only scalable operators can keep the spread. I hope this was helpful. Make sure you follow the podcast for more, share with others, and we'll see you next time.