Late last year, John W. Thiel, the former head of Merrill Lynch Wealth Management, announced he was launching an independent RIA, Indivisible Partners, designed, he says, to be an “accelerator” for ambitious advisors looking to grow their business.
Earlier this year, Indivisible added its first advisor team, New York-based Woodring I LeRoy Capital Advisors, with about $640 million in client assets.
Thiel and his team know something about running platforms for advisors. His co-founders include former chief operating officers, division executives and managing directors of Merrill Lynch. But he says he wants to build something different with Indivisible, focusing less on the markets and more on the planning and client outcomes.
“As I told my advisor for years, ‘I know what the S&P 500 did ‘cause I run the business. The question that you need to answer first is, do I have enough?’” Thiel said.
WealthManagement.com spoke to Thiel about his firm’s model, how his history with goals-based wealth management will come into play, and the services and technology they want to offer advisors.
The following has been edited for length and clarity.
WealthManagement.com: How did the idea for Indivisible Partners come about?
John W. Thiel: I retired seven years ago. My COO at Merrill Lynch and then some of the field leaders retired two or three years ago. But the decade from 2001 to 2011 was a lost decade for equity markets, right? It returned 1.5%. No one’s goals got achieved, and everybody was still out there talking about how they beat the benchmark. And I was like, “Man, this is tone-deaf.”
And that’s when we started goals-based. We did a lot of work on that and operationalized it, but even goals-based was falling short because it’s about outcomes. When I was a client, for instance, I’d fund my kids’ college education accounts, and they started going to school in 2005. I mean, there was not enough money there because the markets had done so poorly, and the sequence of returns was really bad. We just decided that we weren’t going to be able to finish it in that current structure, with the ownership structure. That’s the nice way to say it.
But since then, we’ve been watching the industry and have a feeling for lots of reasons, regulatory and others, that the advisor keeps getting diminished and keeps getting marginalized or deprioritized, and resources are being taken away to give to the shareholders. We felt like that was wrong. The true value proposition in our business is that advisor and the relationships they have with their clients. It’s enduring, much more than any other relationship. It isn’t an institutional relationship; it is a one-on-one personal relationship for the most part.
We felt like, one, we hadn’t quite finished the work to get the outcomes for clients, and we felt that way about the advisor. We were going to consult, and then we just talked to enough people to realize that no one really listens to you. So instead of telling people, we decided to go show people. This is how it could be done. And that’s what we’re in the process of doing.
WM: I can understand the argument that the advisor is diminished in a wirehouse environment, but what do you think of all the aggregators and platforms that are rapidly consolidating firms in the independent wealth management space?
JT: I think very highly of it, but the same thing is going on there. Private equity is growing, and they’re turning them back into a big firm. You see the influence.
I went and talked to private equity when I retired, and I had a non-compete, so there wasn’t much I could do. But they wanted me to operate, and I didn’t want to do that. You saw the writing on the wall. They were going to cut expenses. They wanted to limit the offering so that it could “scale.” And then they had to supervise it in a cost-effective way, which meant limiting choice and creativity and flexibility. And I just worried that a lot of these advisors were leaving for something that was going to turn right back into what they left.
WM: How is Indivisible’s model different from others out there, and how are you going to make sure that the advisor isn’t diminished?
JT: I could talk to you about our tech stack and the fact that we have John Hogarty, our COO, and Alok Kapoor, who’s our CTO, who was a head of tech infrastructure at Merrill and went to Fidelity after the bank bought us. These guys have operated complex platforms at scale. And one of the reasons we wanted to do this is because technology has evolved so substantially that we can actually build something that is never going to go obsolete because of APIs. We can plug in. I mean, for instance, we’re trying to make planning choices, and you know the players out there, and we’re pursuing them. And then we bump into an old friend, Jeff Coyle, who’s founded Libretto and we’re like, ‘That’s better.’
The tech stack will be different, but I’m not going to argue with somebody who says, ‘Well, mine can do that.’ One, what we’ve heard is that the leadership team’s experience is helping make a difference. We can help people grow. We know how to operate; we know how to bring efficiency to the advisor practice. The people we’ve chosen, we are pushing them every week to evolve their offering because it doesn’t measure up as it could.
There’ll be that constant evolution all in the name of creating efficiency and productivity for the advisor and the ability to collaborate for the client, which is still a very big piece that’s missing in our industry. I’m not saying making investment decisions but planning. Why do I have to call my advisor to give them another set of assumptions and then a couple of days later get something back? Why can’t I do it at 2 in the morning when I’m freaked out about tariffs?
Each team owns 100% of their business and always will in our model, but they also all get equity interest in the broader partnership. They’re going to participate alongside every other team in everybody’s growth.
WM: Is that equity something that they get as part of the recruiting deal to come on board, and what kind of percentage are they getting?
JT: It’s based on a formula. It depends on when they come and the amount they’re doing. We’re incenting the early teams a little bit more than we will eventually with other teams.
But we designed this to keep this asset. We are not looking to dress this thing up and sell it. We want to build an enduring business that highlights the advisor, makes sure the clients understand if they’re going to make progress or achieve their desired outcomes, and then over time provide cashflow to the shareholder.
WM: How is the firm currently funded?
JT: We funded 40% of the company. Then we went to friends and family, and we’re actually oversubscribed. Now we have to deliver.
WM: We covered the news when you added the first advisor team. Are you adding others in the near term future?
JT: We’ve got offer letters signed for two other teams. They’re in the various stages of transition.
WM: Do you have any specific goals for how many advisors you want to get on the platform or how many assets?
JT: We have a very conservative business plan because we really want to make sure that we transition these teams well. While we think we can design a platform, we also know it has to be tested in the real world. We want to give ourselves and them the time to make sure it operates as we intend, recognizing that something can always go wrong. We’re going to be mindful in the first year, and the second year goal was a slightly bit higher. And then the third year we’ll ramp up, but we don’t intend to try to build the biggest. We want to do it really effectively, and we want the advisors to have two assets: their business and a meaningful equity interest in the broader partnership that grows.
We also want to bring family office services down to whatever level that advisor chooses to serve.
WM: Will goals-based planning be a big aspect of the model?
JT: We believe that we need to evolve the definition of advice to one that is advice is our ability to improve the quality of every decision the client makes so that they achieve their desired outcomes. Because at the end of the day, it isn’t one decision; it isn’t an annual asset allocation rebalance. Every decision they make is intertwined with their short and long-term plan. The technology didn’t exist before to do that, but it does now.
But we’re really marketing to the advisor to support their relationships with their clients and help them grow that business that they own.
We’re not a platform provider only, right? We’re not just this tech stack. We’re experienced wealth management leaders, 40% of which were successful advisors. We’ve helped coach the top teams at Merrill Lynch that exist today.
WM: How will you use that Merrill experience to help advisors grow?
JT: One thing, there’s a real demographic issue in this industry. A third of the advisors are going to retire in the next 10 years. That’s trillions of dollars that are going to be potentially up for grabs if they don’t have a great succession plan.
So, how do we prepare people, one if they are in that group, to have a well-thought-out succession plan? We’re going to help them build a succession plan and/or identify the clients in the marketplace that may be money in motion because that next generation, that spouse, never had a personal relationship with that particular set of advisors.
Two, the same thing’s going on with to medium-sized businesses. There’s a lot of people who run the business whose kids are not interested in being in that business, or are going to invest a lot of money in the tools and people to pursue that marketplace.
Our teams are out there in advance of that business sale, supporting that business owner with tools like valuation software and access to the boutique investment banks that would serve that size of the market so that that conversation is happening years before, versus trying to show up at a beauty contest and try to win. Just thinking through that infrastructure and what it takes and having the tax and estate planning and structuring expertise for the advisors to leverage is another potential area.
WM: With the succession planning help, what would that look like if an advisor wanted to retire?
JT: I don’t want to give the details of the model because it’s proprietary. But think of us supporting that next generation in that purchase but also supporting that senior advisor in designing the role and their involvement, and then the longer-term economics for the selling advisor.
WM: Will this involve any kind of training program for younger advisors?
JT: We’re certainly going to help teams bring in talent to be that next generation. And we will spend time as a group helping them develop those people. I would stop short of saying we have a training program because the best training, honestly, is a combination of knowledge and on-the-job experience. It’s really helping the team create the structure of that development plan within their own team.
When we built the private banking business at Merrill Lynch, the philosophy that I figured out really quickly was you have complexity, which is clients and their sophisticated needs, especially for that marketplace, $100 million client. And the team may not have had the capability to match that complexity. Instead of just hiring a generalist that isn’t going to help, we went out and found that capability, and hired to that complexity that the clients had because that’s what the team was missing.
WM: What does the investment platform look like?
JT: We’re identifying teams who have a point of view. They either do it themselves well, or they outsource it. We’re agnostic. We really are just trying to leverage the expertise that exists out there. There are so many wonderful opportunities out there and so many brilliant managers in private markets, public markets that have points of view. But these teams are coming to us already successful in all cases. We’re going to incorporate their thinking.
WM: Do you have any plans to do M&A?
JT: No. It would have to be really unique and special. But we’ve watched that movie; it doesn’t go well typically. In big M&A transactions, advisors leave. They use that opportunity to shop themselves in the marketplace. When you put the pencil to it, the economics are all on the backend. And when you take a lot of upfront economics, you’re selling your growth. And I think that’s a bad idea.