Navigating Growth: Revolutionizing A $1 Billion RIA's Journey
by Private Advisor Group
Background
The complexities of running a business are amplified by the pressures of expansion, technology evolution, regulatory compliance, and the need for scalability. Private Advisor Group specializes in aiding Registered Investment Advisors (RIA’s) aiming to address these areas while elevating their capabilities. Read the story of how Private Advisor Group helped one RIA with over $1 billion in assets under management wind down its RIA operations and tuck into our established firm. Uncover the decisive factors and timeline behind its transition, which offer valuable insights into this transformative journey.
Introducing AK Financial Group
Andrew C. Karlinski, CFP®, founder of AK Financial Group, a prominent West Coast team within Private Advisor Group, knows that time is priceless. At 72 years young, Mr. Karlinski is a master of time management. He is known for always being accessible, energized, and present with clients and advisors. With a natural curiosity for learning, whether that involves finding out more about an individual or immersing himself in a new culture, he lives a very active lifestyle. You’ll discover he embraces the mobile office on a global level (he has traveled to more than 35 countries so far) and when not at the office, he’s likely snowboarding, paddle boarding, or embarking on another outdoor adventure.
Mr. Karlinski founded AK Financial Group in 1976 and by August 2022, when his firm joined Private Advisor Group, he had grown it into a $1 billion RIA. Mr. Karlinski built his business focusing on guiding clients through investment strategies and financial planning techniques to reach balance and wellness with their financial and personal lives, which is a goal he pursues in his own life.
Time for a New Chapter
When Mr. Karlinski began considering the next chapter for his $1 billion RIA in early 2021, many new models and affiliation options were available in the marketplace.
“I spent probably a year and a half thinking about restructuring how I did business. I wasn’t planning on leaving the business, but I had been an RIA for a long time — I was an early adopter of the model in 1984. I wanted to stay in the wealth management space but it was time to relinquish some of the responsibilities, including the compliance burden and the nonstop complexities of running an RIA,” he said.
The Road to Private Advisor Group: Finding True Alignment in a Complex Landscape
Given the ongoing RIA market M&A and succession planning activity, Mr. Karlinski knew he had many options to consider when it came to the next chapter for AK Financial Group.
“My mindset at the time was: ‘I’m not ready to exit the business or retire. I’m going to keep doing what I’m doing.’ And of course, at that time, the RIA industry was
changing very dramatically, which was another reason I knew the timing was right for this move,” said Mr. Karlinski.
His desire to wind down the RIA operations but remain very much involved in the business led him to Private Advisor Group in early 2022.
“We needed a true-fitting culture, and we found a strong, symbiotic cultural fit at Private Advisor Group. And I didn’t need to jump through any hoops for us to be able to come on board. There would be no heavy lift in the transition process, that was very attractive to me,” he said.
Andrew Karlinski began to consider the next chapter for his $1B RIA.
Announcement of Merchant’s equity stake in Private Advisor Group inspired Mr. Karlinski to dive deeper into conversations as it strengthened long-term growth outlook and signaled additional funding for investment management solutions, tech enhancements, and more.
Alignment & Equity Program serving to expand valuations and provide advisors direct economic interest in the overall Private Advisor Group community launches leading Mr. Karlisnki to sign on the dotted line.
A People Business: Finding the Right Fit for My Team
“More community was also very important to me. The people and teams needed to be a good fit with my advisors and staff, so we needed to work in an environment where you can also have a sense of humor. Private Advisor Group had all of this and more, which of course are all reasons why I’m here right now. It’s just a wonderful group of individuals that I want to partner with and grow with,” Mr. Karlinski added.
A giving-back mentality was also a requirement that Private Advisor Group met, as Mr. Karlinski is very involved in philanthropy. Throughout his life, he has actively engaged in numerous nonprofit leadership roles, dedicating his time and expertise to various causes. Perhaps most notably, his family established the Teddy Karlinski. Scholarships, Inc, a registered 501(c)(3) organization offering scholarships to young athletes participating in the esteemed Aspen Junior Golf and Aspen Valley Snowboard Club programs. Mr. Karlinski and his family are providing financial assistance to aspiring athletes and creating a lasting legacy in memory of his son Teddy.
“We needed to find a partner with a shared belief in giving back to the community. Many of the senior leaders at Private Advisor Group have held leadership positions at nonprofits at a very high level, and that was important to me,” he said.
The Deciding Factors of the Wind-down
Donald Stahl, Head of Sales & Solutions at Private Advisor Group, shared:
“The decision to transition an RIA practice is complex and is often heavily influenced by the owner’s or owners’ personal circumstances, the state of the business, and market conditions. If you examine timing for AK Financial Group, the pandemic had created strong demand for financial guidance and support in the marketplace. Americans were navigating economic and job uncertainty, and many financial advisors reported experiencing heightened client inquiries and requests for support. When you factor in the strong investor demand for advice with an increasingly challenging regulatory state, you have an environment where RIA owners will explore options that better align their businesses with their core goals.
“Other important factors and considerations regarding our partnership included the fact that Andy’s practice was in good order—he had a strong financial foundation, loyal client base, well-trained staff and the practice has a well-defined service offering. His geographic location is a competitive advantage for our organization too, as we’ve been strategically expanding nationwide and it further strengthens our West Coast presence.
“Going back to some of the personal considerations (often one of the top influencers), his desire to free up capacity and time meant that tucking into an RIA with scale, consulting, and compliance resources was a key consideration compared to alternative paths like private equity, a strategic partner like a bank, or perhaps an independent broker-dealer. In AK Financial Group’s situation, Andy is a hybrid financial advisor, and by remaining with a hybrid firm, his clients and advisors who are part of his practice experienced minimal disruption. He was also able to keep the AK Financial Group name and brand equity, retain his team, and preserve the autonomy that independent financial advisors with an entrepreneurial mindset tend to love.
“Knowing his preferred path to join another hybrid RIA at the onset helped him enter discussions with interested parties from a position of strength. As advisors within Andy’s practice are independent and have choice in their affiliation, both Private Advisor Group and Andy ensured that AK Financial Group advisors were introduced to the new culture, support teams, and guided through the transition.
“Andy was forthcoming in that he knew he wanted to find an option that would let him stay involved in growing the business, advising clients, and mentoring advisors while taking away many of the time constraints that come with operating an RIA of that size.
“Private Advisor Group was able to absorb the compliance burdens while offering access to proprietary programs like WealthSuite, a competitively priced investment management platform, and our Alignment & Equity Program, which Andy shared was also a determining factor in his decision to join, as he was seeking liquidity for growth and a unique equity opportunity not offered broadly in our profession.”
20%
Combined staff time saved post-transition.
2 - 3 MONTHS
Karlinski & team of advisors transitioned their books to Private Advisor Group.
20% +
Gross revenue increase 2022- 2023 (approximately $2.1 million to $2.5 million) post-transition.
Of course, the monetization of financial advisory practices is a major ongoing trend in our industry. Before joining Private Advisor Group, I was learning everything I could learn about it and simultaneously educating my advisors on the subject. And once I really drilled down into Private Advisor Group’s Advisor Alignment and Equity Program, I realized I found gold. In this program, we all sit on the same side of the table. It is 100% voluntary, and it gives advisors a unique opportunity to monetize a portion or all of their practice.
Examining Client Impact
A Promise to Clients: “It’s Business as Usual”
Once Mr. Karlinski made the final decision to wind down the RIA operations and join Private Advisor Group in 2022, the transition process took him about two months and took his corporate advisors about three months. He said it was painless and added that one of the reasons it went so smoothly was because he had prepared his advisors and clients ahead of time.
“We pride ourselves on communicating with our clients, and with our advisors. So, we’re constantly in touch. For clients, I prepared them for the change, communicating with them early on, and often, about what to expect during the transition,” said Mr. Karlinski.
He remembers saying: “You’re going to start seeing some information regarding us joining Private Advisor Group—and nothing major is changing for you. What will change is we will have more back-office support, and that will allow me to service you better and have access to more tools and capabilities.”
He said when it came time for clients to sign on the dotted line, they knew everything they needed to know, and there were “zero” issues.
The Aftermath of the Tuck-in
Since joining Private Advisor Group, Mr. Karlinski has kept true to his promise and has not slowed down.
“One of the major attractions for me was the opportunity for Private Advisor Group to align in growth. Becoming a managing director and being on the leadership team has been really rewarding and fun for me,” said Mr. Karlinski.
And the move to Private Advisor Group has been good for business, too. Mr. Karlinski was an inaugural adopter of the firm’s proprietary Advisor Alignment & Equity Program. The initiative aims to create deeper alignment of interests throughout the firm’s community of financial advisors and strategic partners, including Merchant, an equity partner and capital contributor to the program. Interestingly, Merchant was one of the firms Mr. Karlinski spoke with during his discovery phase for potential partners.
“After joining Private Advisor Group, we had our best year ever in 2022, even with the challenging market environment. Having another team supporting us, and working with me, my advisors, and our clients, has catapulted us to new heights. At the same time, the compliance lift has given us back so much time to focus on growing client relationships,” Mr. Karlinski said.
“The team at Private Advisor Group is absolutely some of the best talent in the industry. Their level of proactivity, professionalism, and productivity is unbelievable. And they are literally at our fingertips,” he added.
And Mr. Karlinski is not planning to slow down any time soon. He follows the school of retirement motto of Berkshire Hathaway’s Warren Buffett, 92, and Charlie Munger, 99.
“Depending on whatever age they retire, I might consider retirement when I get to that age,” he said.
Cultural Compliment
Anne Mortera, Director of Advisor Grouth and Engagement at Private Advisor Group, shared:
“It is pretty incredible what Andy has been able to do in terms of building a business and mentoring advisors. He started the virtual office trend many years before the pandemic. He, of course continues to retain his clients, increase his AUM and production, and still finds time to be very much engaged with the entire Private Advisor Group community. Some of his team members have been with him for more than 20 years—that tells you the type of relationship they each have with him.
“Outside of Andy’s direct team, he’s led a variety of West Coast advisor events where we network, share industry updates, and connect with leading industry providers on product and services. He’s truly an incredible mentor and friend to so many of us at Private Advisor Group.”
Conclusion
While specific benefits of winding down an RIA can vary depending on individual circumstances and the chosen path forward, increased efficiency, simplified operations, and expanded services are possible. It’s fair to say this was a win-win for Private Advisor Group and AK Financial Group.
West Coast Geographic Expansion
Enhanced Compliance & Regulatory Support
Equity Sharing & Alignment
Learn more by visiting privateadvisorgroup.com.