Adam Cox’s Decision to Leave Bank and Start RIA
Adam Cox made a bold decision to leave his position as the wealth management head of a regional bank to embark on a new journey by starting his own Registered Investment Advisory (RIA) firm. This move was not only driven by the new career opportunities available to independent advisors but also by the limited growth prospects Cox observed for wealth managers within banks.
Together with his colleagues Kyle Cipperley and Paula Bindert, Cox departed from The First National Bank in Sioux Falls, South Dakota, to establish Prairie View Wealth Partners, a new RIA. Despite the significant downgrade in terms of overseeing a team of 40 advisors and employees at the regional bank with $10 billion in client assets, Cox believed that this transition was essential for his professional growth after a decade at The First National Bank.
Challenges Faced by Advisors at Banks
One of the major limitations for advisors working as direct employees at banks or other institutions is the lack of ownership stake in the wealth management business they help build. Cox emphasized the importance of providing advisors a clear path to ownership and equity, which is often not feasible in many traditional settings, including banks.
A report by Datos Insights revealed that only about a third of banks with wealth management divisions offer long-term investment programs to give advisors a sense of ownership in their clients and practices. This puts bank-based advisors at a disadvantage compared to RIAs and wirehouses, which frequently provide ownership opportunities and deferred compensation incentives to retain talent.
The Appeal of RIAs to Bank-Based Advisors
For Cox, the world of RIAs was familiar territory. Having previously worked at a registered investment advisory in Minneapolis before returning to Sioux Falls, he missed the autonomy and flexibility that came with working at an independent firm. He was also impressed by the technological advancements and service offerings that now enable RIAs to provide clients with a wide range of services previously exclusive to large institutions.
Reports from Cerulli Associates indicated a significant increase in assets managed by pure RIAs and hybrid firms with RIA and brokerage arms, highlighting the appeal of ownership and independence to advisors leaving traditional institutions.
Challenges Faced by Advisors at Banks
Many banks rely on referrals to drive business for their wealth management practices, but this system does not always meet advisors’ expectations. Cox acknowledged that referrals from bankers within the institution can be inconsistent, and there is often pressure to cross-sell bank products and services to clients.
Trout from Datos noted that advisors are sometimes promised 100% of their referrals from the bank, but in reality, this only materializes about 20% of the time. This lack of consistent referrals and the pressure to promote internal banking products can hinder advisors’ ability to serve clients effectively.
Wealth Managers’ Desire for Independence
Another critical factor driving advisors to transition from banks to RIAs is the focus on wealth management in independent firms. Cox highlighted that wealth management is usually a secondary consideration at banks, whereas independent and wirehouse firms are dedicated to serving wealth management clients.
At Prairie View Wealth Partners, Cox aims to provide a comprehensive suite of wealth management services with a focus on tax planning, investment portfolios, and personalized client partnerships. By offering ownership and autonomy, Cox believes that clients are better served by advisors who are committed to their long-term financial goals.
As Cox and his partners embark on this new venture, they are leveraging custodial services from Raymond James and utilizing advanced technology solutions for tax planning, estate planning, and client relationship management. Their goal is to grow Prairie View Wealth Partners to $250 million in client assets within a year, emphasizing continuity, autonomy, and client-centric decision-making.
Conclusion
Adam Cox’s decision to leave The First National Bank and establish Prairie View Wealth Partners underscores the growing trend of advisors seeking ownership, independence, and autonomy in their wealth management practices. By addressing the limitations faced by advisors at traditional institutions and embracing the opportunities offered by RIAs, Cox is positioning his firm to provide personalized, client-focused wealth management services.
Source: Financial Planning
