11. What Aggregators Know That You Don’t

Many advisors see aggregators as the disruptors of the wealth management industry.

But what if they are actually a symptom of something much bigger?

In this episode, Darrell breaks down the structural forces driving the rise of aggregators and why their growth may be unavoidable. He explores the shrinking advisor workforce, accelerating retirements, rising acquisition costs, and the growing separation between ownership and advice.

You'll learn why scale is becoming a competitive advantage, why succession is fueling more M&A activity than growth, and how capital is reshaping who can compete for acquisitions.

Because aggregators did not create these industry changes. They emerged because math no longer works the way it used to.

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Transcript

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Aggregators didn't appear because a group of firms decided to roll up the industry. They exist because the math broke. And once the math breaks, the structure of the industry changes whether you like it or not. The question is, what does that broken math mean for your practice? Let me tell you about an advisor named Steve. He built a strong independent practice, $450 million in AUM, disciplined operator, loyal clients, good margins. And he could not stand aggregators. He saw them as outsiders, imposing rigid structures, distorting valuations, changing the game in ways that didn't feel right. For years he ignored them, kept his head down, focused on his clients. Then the market came knocking hard with two brutal facts. First, a competitor or friend of his down the street sold to a larger platform. Suddenly that firm wasn't just a competitor, it had more resources, deeper bench strength, and better technology than Steve could ever access alone. Second, Steve tried to acquire a smaller practice. He lost the deal. Not because he wasn't a good buyer, but because he couldn't compete on structure, on price, or on certainty. And that's when the question shifted. From why are these aggregators here? to what do they know that I don't. And once he started looking at the underlying forces, it became clear this wasn't a trend, it was an outcome. Let's start with the numbers. The replacement rate of advisors entering the industry is under 40%. You heard that right. Think about it. For every eight advisors leaving for retirement for any reason, only three are coming in. But it gets worse at the same time, over the next decade, 10 to 11,000 advisors across the US are expected to retire every single year. Let that sink in. We're talking about a hundred to a hundred and ten thousand advisors exiting the market in 10 years. You don't need a complex model to see where this goes. Fewer advisors, more clients, more assets concentrated in fewer hands. And in that environment, scale doesn't just help, scale wins. But why is this happening right now? I see four fundamental drivers reshaping the industry, and they explain exactly why aggregators are now essential. Driver number one: a shrinking advisor base forces consolidation. When an industry isn't replacing its workforce, it consolidates. It has to, because the work doesn't go away. Clients still need advice. Clients still need someone to walk them through the maze. Assets still need to be managed. So what happens? Larger organizations absorb smaller ones, not out of strategy, out of necessity. Aggregators are, in many ways, a response to a simple imbalance. Demand for advice is stable. I actually think it's growing. Supply of advisors is shrinking. That gap has to close somewhere. Scale is how it closes. Driver number two, retirements are accelerating the timeline. It's not just that advisors are leaving, it's the speed at which they're leaving. This isn't a gradual shift, it is a wave. And most of those advisors, they don't have internal successors ready to take over. Which brings us back to what's actually driving MA as we discussed before. It's succession, it's not even growth. So when thousands of advisors exit every year and there aren't enough internal buyers among the independents to absorb them, external buyers step in at scale. That's exactly what aggregators are built to do. They're not opportunistic, they're filling a structural gap. That doesn't mean smaller firms can't survive, but it does mean the bar gets higher every year. And the advantage increasingly tilts towards those with scale. Third driver of this, capital is reshaping who can compete. Practice valuations have climbed, which sounds like good news until you try to buy one. Independent advisors are finding it harder to compete for acquisitions because first they don't have the same access to capital. They can't structure deals as flexibly. They don't have systems built for integration at volume. Larger platforms do. They can move faster, offer more certainty, and absorb businesses more efficiently. So the market naturally starts favoring them. Not because they're better people, but because they're better equipped. That's how capital reshapes an industry. Fourth driver, the separation of ownership and advice. Here's another shift happening quietly but steadily. Owning the business and managing the clients are becoming two different roles. Historically, they were the same. You built the firm, you owned it, you served the clients. Now more advisors, especially younger ones, they don't necessarily want to be the owner. Or they can't build it or they can't buy it. They want to advise. They want a stable income, support infrastructure, defined roles, less operational burden. That model fits better inside larger organization, management layers, HR departments, systems already in place. Aggregators create environments where that separation works. And as that preference grows, so does the relevance of those platforms. When you put this all together, a shrinking advisor base, accelerating retirements, capital advantages, workforce shifts, they all point in the same direction. Scale. Aggregators aren't causing this, they're the result of it. They are the structure that forms when all of these forces converge. What does this mean for you? This ties directly into what we previously discussed about succession, about equity, about outcomes. Because aggregators don't just buy firms, they create vehicles, vehicles that can grow faster than any one firm on its own. And this is where the concept of that second outcome or the second bite comes in. When you align with the right platform, you're not just solving succession, you're potentially stepping into a different growth curve entirely. But, and this is critical, selection matters. Not all aggregators will win. Some will stall, some will overextend, some will never reach the scale they promise. So this isn't about blindly joining one, it's about understanding why they exist and choosing carefully if and when to engage. Next episode, I'll get into detail on why some aggregators grow fast while others stall. If you found this episode helpful and would like to get to the next level of detail, be sure to subscribe and hit that notification bell to be the first to get future episodes. I'm Daryl with Advisor Hunt. It's good to have you here, and we'll see you next time.