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Deep Research: How Smart Money Evaluates Wealth Management Firms
Episode 382
Thursday, 22 October, 2026

Steve Chubak, Managing Director at Wolfe Research What can advisors learn from the way institutional investors evaluate wealth management firms? Wolfe Research’s Steve Chubak offers a different lens on growth, recruiting, AI, pricing, M&A, and what separates stronger firms from the rest. In Summary Financial advisors and institutional investors often evaluate the same wealth management firms—but from very different vantage points. Advisors may be asking whether a firm offers the platform, technology, economics, and resources they need to serve clients and grow their businesses. Institutional investors are digging into another set of questions: Is that growth sustainable? What does it cost? How effectively is the firm deploying capital? And what could change its economics over time? Steve Chubak, Managing Director at Wolfe Research, spends his days studying those questions across the wealth management ecosystem. His research covers firms ranging from wirehouses and regional brokerages to custodians, broker dealers, and alternative asset managers. Here, Steve brings that institutional perspective to the issues that matter directly to advisors. He explains why investors increasingly distinguish between growth generated by recruiting and growth generated by existing advisors, how rising transition assistance is changing the economics of recruiting, and why organic growth remains one of the most important measures of a firm’s health. The discussion also explores AI’s potential impact on productivity, advisor fees, and firm pricing; the evolving economics of cash sweeps and platform fees; the Vanguard-Altruist transaction; consolidation across the industry; and why human advice may prove more resilient than some predictions suggest. The result is a different framework for evaluating the firms advisors work for, partner with, or may someday consider joining. The Storyline Steve occupies a unique seat in the wealth management industry. Rather than evaluating firms as an advisor, recruiter, or executive, he studies them on behalf of institutional investors. His team at Wolfe Research looks across the wealth management ecosystem and analyzes how individual firms are positioned, where growth is coming from, what it costs to generate that growth, and what risks could alter the outlook. That distinction drives the conversation. Jason initially asks what institutional investors may see that retail investors and advisors miss. But the discussion reveals something more useful: Both groups are trying to answer many of the same fundamental questions, just for different reasons. An investor may want to know whether a firm’s organic growth can support its stock price. An advisor considering that firm wants to know whether its platform, economics, technology, and strategy can support their business for years to come. The overlap leads into a deeper discussion of advisor movement and recruiting. Steve explains why investors increasingly care not just about net new assets, but about the cost of acquiring them. As transition packages have risen, the market has become more focused on the difference between “new store” growth generated through recruiting and “same store” growth generated by advisors already on the platform. From there, the conversation turns to AI—not simply as a technology story, but as a potential catalyst for broader changes in wealth management economics. Steve sees significant potential for AI to improve advisor productivity and platform efficiency while raising longer-term questions about pricing, cash monetization, and how firms get paid. This naturally connects to cash sweeps, platform fees, consolidation, M&A, and the competitive positions of some of the industry’s largest firms. Ultimately, Steve’s institutional lens offers advisors another way to evaluate a firm: Look beyond the recruiting package or headline growth number and ask whether the business underneath it is durable. Topics Covered How institutional investors evaluate wealth management firms What advisors and institutional investors may learn from one another Why advisor movement matters to investors Organic growth, net new assets, and the cost of asset acquisition “Same store” versus recruiting-driven growth Rising transition assistance and recruiting economics AI’s impact on advisor productivity and platform efficiency Potential long-term pressure on advisor fees and pricing Cash sweeps, cash monetization, and platform fees Why transparent pricing could better align firms, advisors, and clients The Vanguard-Altruist transaction and the RIA custody landscape The competitive positions of Morgan Stanley, LPL, and Schwab Private equity-backed wealth management firms and leverage How firms should balance recruiting growth with capital discipline Why human financial advice may remain resilient in an AI-driven world The KPIs Steve uses to evaluate wealth management businesses Data ownership, AI, and the potential case for self-clearing M&A, industry consolidation, and why strategic buyers may have to “buy it twice” > Download a transcript of this episode… Listen and Learn Highlights for Advisors How the institutional view differs from the advisor view — 08:05Steve explains why institutional investors tend to go much deeper on individual companies, competitive positioning, and the “game theory” behind industry change, while advisors often take a broader, relationship-driven view. Why advisor movement matters to Wall Street — 11:28Jason connects Steve’s research directly to the questions advisors ask when evaluating firms. Steve explains why organic growth, net new assets, and the cost of recruiting advisors receive significant attention from institutional investors. Why all growth isn’t created equal — 13:38As recruiting packages have increased, investors have become more discerning about the quality and cost of growth. Steve explains why growth generated by existing advisors can sometimes be more attractive than growth purchased through recruiting. AI: Productivity opportunity or pricing threat? — 16:09Steve describes himself as moderately bullish on AI, particularly because of its potential to improve advisor productivity and platform efficiency, while acknowledging longer-term questions around monetization and pricing. Rethinking cash sweeps and platform fees — 17:55Steve breaks down how firms monetize client cash and makes the case for a more transparent pricing structure that could better align the economics of clients, advisors, and firms. What Vanguard-Altruist could mean for RIA custody — 23:53Steve puts the transaction into perspective and discusses Altruist’s potential to move upmarket, while explaining why Schwab’s breadth, scale, technology, and product offering remain formidable competitive advantages. Which firms could keep gaining share? — 26:54The discussion turns to Morgan Stanley, LPL, and Schwab and why Steve believes each could continue consolidating share within its respective channel. The economics behind increasingly large recruiting deals — 30:48Jason and Steve debate how much firms should spend to recruit advisors, the importance of capital discipline, and whether maximizing recruiting growth is always worth the cost. Will AI force advisors to lower their fees? — 35:43Steve sees potential for some pricing pressure but explains why advisory fees have historically demonstrated greater resilience—and why increasingly sophisticated advice may help preserve that value. Why the last 20% of advice may matter most — 38:50Using his own experience trying to replace a lawyer with an LLM, Steve explains why technology can get surprisingly far while still leaving a critical gap where human expertise, judgment, and reassurance matter. The KPIs that reveal the health of a wealth management firm — 40:51Steve shares the metrics he looks at first, including organic growth and operating leverage, and explains why unusually low expense growth can sometimes signal underinvestment rather than strength. What could drive the next wave of industry change — 42:18Data ownership, AI, self-clearing, M&A, and consolidation come together as Steve considers what firms may need to control – and invest in – to remain competitive. Key Takeaways Look beyond headline growth. Recruiting success and strong net new asset numbers can be impressive, but Steve’s institutional framework asks a second question: What did that growth cost? As transition assistance has increased, investors have become more focused on the quality of growth—not simply its quantity. For advisors evaluating a firm, that same question can reveal whether its strategy appears sustainable. Organic growth may tell you more about a platform than recruiting alone. A firm that helps its existing advisors grow can demonstrate something important about the strength of its platform, technology, service, and capabilities. Steve describes organic growth as one of the first metrics he examines when evaluating a wealth management business. AI’s biggest impact may come through its knock-on effects. The immediate opportunity is productivity. The longer-term questions involve pricing, cash monetization, platform fees, data ownership, and competitive positioning. Rather than viewing AI as a standalone technology issue, Steve considers the “game theory” around how one change could force responses across the industry. Firm economics matter to advisors—even if they never plan to become investors. A firm’s capital allocation, growth strategy, recruiting costs, technology investment, and revenue model can ultimately affect the advisors who work there. For an advisor evaluating a potential firm, model, or equity partner, understanding the health of the underlying business can add another dimension to the decision. Human advice still has a powerful value proposition. Steve points to the limited adoption of robo advice relative to early predictions as one reason not to assume technology will eliminate demand for advisors. His own experience using an LLM for legal work illustrates the point: Technology may handle much of the task, but the remaining portion can involve exactly the complexity, judgment, and confidence for which clients value a professional. https://youtu.be/ps_8bq2CE9E Quotable Moments On the difference between institutional and wealth management perspectives:“There are times when [institutional investors] are myopically focused on the numbers.” On what institutional investors increasingly want from growth:“Good NNA profile, but not necessarily overpaying for that growth.” On AI and the wealth management industry:“From an advisor productivity standpoint and from a platform efficiency standpoint, I think that AI is a huge boon or windfall for the industry.” On creating better alignment:“My preference has always been for more transparency and more alignment of incentives.” On the continuing value of human advice:“People do value advice, human intervention.” On technology getting most—but not all—of the way there:“I got about 75 to 80% of the way there. And that last 20%, I was incredibly uncomfortable.” On evaluating a wealth management business:“Organic growth first and foremost.” On M&A involving advisor businesses:“You have to buy it twice.” FAQs What do institutional investors look for when evaluating wealth management firms? Steve identifies organic growth as one of the most important indicators, along with operating leverage and the balance between investing for future growth and delivering earnings today. Investors also examine net new assets, the cost of acquiring those assets, recruiting economics, technology investment, and the durability of a firm’s business model. Why does advisor recruiting matter to institutional investors? Advisor movement can materially affect organic growth and net new assets. But investors increasingly look beyond how many advisors a firm recruits to consider how much it spends to acquire that growth and whether those economics can produce attractive long-term returns. What is the difference between “same store” and “new store” growth in wealth management? In the context of this discussion, “same store” refers to growth generated by advisors already on a firm’s platform, while “new store” growth comes from newly recruited advisors and their assets. As recruiting costs have risen, Steve says investors have placed greater value on strong same-store growth because it can represent a less expensive source of net new assets. How could AI affect financial advisor fees? Steve expects AI to improve advisor productivity and firm efficiency but believes it could create some longer-term pricing pressure. He notes, however, that advisory fees have historically proved more resilient than pricing in areas such as asset management and brokerage, particularly where clients value complexity, judgment, and human advice. Could AI replace financial advisors? Steve does not see technology eliminating the value of human financial advice, particularly for clients with complex tax, trust, investment, and planning needs. He points to the experience of robo advisors as evidence that predictions of widespread replacement of human advice have not played out as many originally expected. What are cash sweeps, and why do they matter? Cash sweeps allow firms to earn revenue from idle client cash held on their platforms. Steve argues that this can create a less transparent exchange of value and suggests the industry could gradually move toward more transparent platform fees paired with more competitive rates on client cash. Will platform fees cause advisors to change firms? Based on Wolfe Research’s analysis of firms that have introduced platform fees, Steve says they did not find tangible evidence of significant disruption to advisor recruiting or organic growth. His view is that advisors may be more focused on the quality of a firm’s technology, service, and overall platform than on a modest platform fee. What makes a wealth management firm attractive from an institutional perspective? Strong organic growth, disciplined spending, effective technology investment, attractive economics, and a sustainable competitive position all matter. Steve also emphasizes the importance of balancing growth with free cash flow rather than pursuing growth at any cost. How could consolidation reshape wealth management? Steve expects scale players to continue gaining share across different channels and discusses Morgan Stanley, LPL, and Schwab as firms with significant competitive advantages in their respective markets. He also sees potential for further M&A, although strategic acquisitions can be complicated by the need not only to acquire a business but also to retain its advisors. What should financial advisors consider when evaluating a firm or equity partner? Beyond payout, recruiting packages, and platform capabilities, advisors can benefit from examining the durability of the underlying business. Organic growth, capital discipline, technology investment, competitive positioning, ownership structure, and the firm’s ability to adapt its revenue model can all offer clues about whether the organization is positioned for the future. Steve identifies organic growth as one of the most important indicators, along with operating leverage and the balance between investing for future growth and delivering earnings today. Investors also examine net new assets, the cost of acquiring those assets, recruiting economics, technology investment, and the durability of a firm’s business model. Advisor movement can materially affect organic growth and net new assets. But investors increasingly look beyond how many advisors a firm recruits to consider how much it spends to acquire that growth and whether those economics can produce attractive long-term returns. In the context of this discussion, “same store” refers to growth generated by advisors already on a firm’s platform, while “new store” growth comes from newly recruited advisors and their assets. As recruiting costs have risen, Steve says investors have placed greater value on strong same-store growth because it can represent a less expensive source of net new assets. Steve expects AI to improve advisor productivity and firm efficiency but believes it could create some longer-term pricing pressure. He notes, however, that advisory fees have historically proved more resilient than pricing in areas such as asset management and brokerage, particularly where clients value complexity, judgment, and human advice. Steve does not see technology eliminating the value of human financial advice, particularly for clients with complex tax, trust, investment, and planning needs. He points to the experience of robo advisors as evidence that predictions of widespread replacement of human advice have not played out as many originally expected. Cash sweeps allow firms to earn revenue from idle client cash held on their platforms. Steve argues that this can create a less transparent exchange of value and suggests the industry could gradually move toward more transparent platform fees paired with more competitive rates on client cash. Based on Wolfe Research’s analysis of firms that have introduced platform fees, Steve says they did not find tangible evidence of significant disruption to advisor recruiting or organic growth. His view is that advisors may be more focused on the quality of a firm’s technology, service, and overall platform than on a modest platform fee. Strong organic growth, disciplined spending, effective technology investment, attractive economics, and a sustainable competitive position all matter. Steve also emphasizes the importance of balancing growth with free cash flow rather than pursuing growth at any cost. Steve expects scale players to continue gaining share across different channels and discusses Morgan Stanley, LPL, and Schwab as firms with significant competitive advantages in their respective markets. He also sees potential for further M&A, although strategic acquisitions can be complicated by the need not only to acquire a business but also to retain its advisors. Beyond payout, recruiting packages, and platform capabilities, advisors can benefit from examining the durability of the underlying business. Organic growth, capital discipline, technology investment, competitive positioning, ownership structure, and the firm’s ability to adapt its revenue model can all offer clues about whether the organization is positioned for the future. Related Resources The Wirehouse Talent Battle: Winners, Losers and What’s Changing Conducting a Strategic Due Diligence Process: 10 Practical Tips for Financial Advisors Steven Chubak, CFA Steven Chubak joined Wolfe Research in September 2018 as a Director and Senior Analyst covering Brokers, Asset Managers & Exchanges. Steven has been recognized as a top three analyst by the Extel All-America Research poll in 2021-2025. Steven previously worked as Senior Equity Research analyst for five years at Nomura Instinet. In 2014 and 2015, he was recognized by Extel as a “Rising Star” for his work in both the Large Cap Bank and Broker/Asset Manager categories. Prior to joining Nomura Instinet, Steven was a partner at Autonomous Research, and before that as an associate analyst at Bank of America and JMP Group. Before embarking on a career in sell-side equity research, he was an associate for the Global Growth team at Alliance Bernstein, and a Structured Products analyst at HSBC. Steven graduated from the NYU Stern School of Business with a degree in Finance/International Business and is a CFA® charterholder. NOTE: The views and opinions expressed by the guests on this podcast are their own and do not necessarily reflect the views and opinions of Diamond Consultants. Neither Diamond Consultants nor the guests on this podcast are compensated in any way for their participation. View the transcript of this episode… Deep Research: How Smart Money Evaluates Wealth Management Firms A conversation with Jason Diamond and Steve Chubak, Managing Director at Wolfe Research.      Jason Diamond: Welcome to the latest episode of our podcast series for financial advisors. Today’s episode is Deep Research: How Smart Money Evaluates Wealth Management Firms. It’s a conversation with Steve Chubak, managing director at Wolfe Research. I’m Jason Diamond, and this is the Diamond Podcast for Financial Advisors. Mindy Diamond: At Diamond Consultants, we help lead advisors identify the right environment for their businesses to thrive, whether that’s at a wirehouse, boutique, or independent firm. With nearly three decades of experience, we’ve guided thousands of advisors and represented more than a quarter of a trillion dollars in assets transitioned. And each year, one in four advisors managing a billion dollars or more who change firms are our clients. Our process is education driven and based on building relationships, starting as your strategic partner well before you’re even thinking of a move. To schedule a confidential conversation, call us at 908-879-1002. Wondering why advisors change firms and where they’re headed? Are transition deals going up or down? Those very questions and more inspired us to create our annual advisor transition report. It’s the award-winning data-driven resource designed for advisors that connects the dots between the motivations around movement and the firm’s appetite for top talent. Arm yourself with the knowledge you need to make smart decisions. Download your copy at diamond-consultants.com/transitionreport. Jason Diamond: Financial advisors have plenty of reasons to take a closer look at the wealth management landscape. They may be considering a change of firms or models, evaluating an equity partner, or simply trying to understand whether their current firm is positioned for the future. And when they do, they tend to look at it through a very specific lens. What will this platform allow me to do for my clients? How will it support my business? And does it give me what I need to grow? Institutional investors look at many of those same firms through a very different lens. My guest today, Steve Chubak, is a managing director at Wolfe Research, where he and his team cover the wealth management ecosystem, from wirehouses and regional firms to custodians, broker dealers, and alternative asset managers. His job is to understand not just how these businesses are performing today, but what their performance metrics and key data points tell us about where they may be headed. And that’s where I think this conversation gets especially relevant for advisors, because whether you’re analyzing a company as an investment or evaluating it as a place to build your business, many of the underlying questions are surprisingly similar. Is the growth durable? What is the firm spending to generate it? How effectively is it investing in technology? And what could disrupt its economics over time? Steve offers an institutional perspective on all of it, including why organic growth may tell us more than headline recruiting numbers, what AI could mean for advisor productivity and fees, the changing economics of cash, and how M&A and consolidation could reshape the competitive landscape. It’s a different way to look at the firms advisors work for, partner with, and consider joining, and at what may ultimately separate the strongest wealth management businesses from the rest. So let’s do it. Steve, thanks so much for joining us. Thrilled to have you here. Steve Chubak: No, it’s great to be here. Really appreciate the opportunity to participate. It goes without saying, longtime fan of the podcast, so nice to finally be on. Jason Diamond: Longtime listener, first-time caller, let’s get going. Before we talk about the business side of things, I want to talk about your background, a little bit of a different flavor of guests for us. So tell us what brought you to the world of research, to the world of wealth management. How’d you end up here? Steve Chubak: Yeah, sure. So I graduated from NYU Stern in undergrad. Most of the folks in my class either went into investment banking or markets. In fact, very few went into research. I myself embraced at least the trading side, but realized over time, I actually had a real passion for doing fundamental analysis on stocks. And I realized this passion in 2008, mind you, where there weren’t a ton of job opportunities at the time as I was making that career pivot. But the beauty of the research side is I get to really engage with some of the smartest investors on the planet day-to-day, unpacking really challenging topics. And specific to the wealth management space, I think what’s really unique about the franchise that we’ve built there is most of my competitors might cover a sleeve of companies within the wealth spectrum. We actually cover the whole ecosystem. So we’re one of the few teams and maybe the only team that covers the wirehouses, the regional brokers, the trading shops like IBKR and Schwab, as well as some of the alternative asset managers. So whether it’s the product side or whether it’s the firms that are providing the platforms, we can cover the whole ecosystem. And it’s just an incredibly dynamic space with TAMs that have really powerful structural growth tailwinds. So never a dull moment. Even today, we’re seeing a selloff in the space around some of the concerns around the Meta Muse launch. And look, it always keeps us on our toes. It always keeps us busy and engaged. Jason Diamond: Absolutely. So there’s a lot to unpack there. I want to just take a baby step back and do the five-year-old version of this. Fair to say, your company covers single stocks from a research perspective. Do you also do anything on the industry as a whole, macro, more broad, just so we know what we’re focusing on today? Steve Chubak: Yeah, sure. Because we’ve spent so much time really unpacking all the trends that are really influencing the wealth space today, we do spend a lot of time publishing deep dive industry reports on the wealth names. We’ll do it when we have the opportunities to engage with management. So we did that recently with LPL and Schwab, but we also host a wealth symposium every year and publish a wealth management primer alongside that. It leverages a lot of industry data. Frankly, it leverages some of the pieces that even you guys have published in the past, but really, just trying to analyze the whole ecosystem to take a more holistic view on what some of the growth opportunities are, but also some of the emerging risks that are impacting the space. Jason Diamond: No doubt. With all that said, I think your lens, at least as I see it, is a little different than our typical advisor. Are you spending your day interfacing with these companies, meaning talking to management of LPL, of Raymond James, of Schwab, and trying to get the picture of what’s working, what’s not working? What does the role involve in real words? Steve Chubak: I would say that engaging with the management teams probably composes about 20% of our day, if that. Most of our engagement is in fact with institutional investors that are looking to invest in the space. So someone that is interested in Morgan Stanley but wants to understand the workplace offering, and we’ll schedule a 30 to 45-minute call. We’ll unpack some of our prior research. They’ll ask for certain custom requests, so we can try and extrapolate what the growth is going to look like for that particular segment. And you can really apply that to any of the companies in the wealth space. So it’s always dynamic. From a bottom-up perspective, each of these companies are quite different. They operate in different channels. There’s no shortage of topics to unpack, but I’d say most of the engagement that we do and most of our time is really spent on the research product and engagement with institutional investors. We do speak regularly with the companies, but that’s probably about 10 to maybe 20% of our day. Jason Diamond: That’s what strikes me in talking to you is you take a institutional lens to a pretty retail environment, meaning the business itself skews certainly retail. What is it that surprises you? Let’s start with something maybe not spicy, but a little bit out of the gates with some punch to it. When you talk to institutional investors and then obviously, you spend your day in the world of retail, what surprises you most about that kind of juxtaposition? Steve Chubak: I think the biggest surprise to me is just the level of detail orientation that we get from our institutional investors. The expectation is if we’re going to cover 35 to 40 names, we are going to know these names inside and out. We’re going to have deep familiarity with the history. We’re going to understand the game theory in terms of how the landscape is going to evolve. And certainly when you have these dynamic themes like agentic AI that are getting introduced or injected into the space, that’s sparking quite a bit of controversy and debate, but the expectation is we have to unpack that game theory. We have to understand how each company is competitively positioned. And in that regard, we are going quite a bit deeper. I would say what’s similar to wealth management is that it’s not so much, even though there’s a strong relationship component that exists for both, I would say that on the wealth management side, you’re taking a much more holistic view of your client, of your customer, where it’s not simply trying to get the portfolio asset allocation right. It’s also about understanding the family needs, how can you optimize from a tax standpoint, what are the lending products that you can offer, so I’d say the service that’s being offered is much broader, whereas for the institutional investors, I think the expectation is narrower focus, but we’re going to go much deeper. Jason Diamond: Yeah, that makes a lot of sense to me. I guess what I’m kind of getting at is, do you feel like the retail audience misses something that you see that your institutional audience just gravitates towards? Is there something, or maybe it’s the other way around? Maybe it’s the institutional guys could learn from the retail guys. I don’t mean to lead the witness, but I think you have this unique seat where you straddle both worlds. Steve Chubak: It’s a great question, and I’d say that it’s probably applicable to both. There’s certainly some elements I’d say institutional investors do underappreciate because they’re so deep in the numbers. There are times when they are myopically focused on the numbers. And the reality is too, when there’s periods of uncertainty, and I know we’ll talk about this in a moment, what the implications are for AI on pricing, on cash monetization, in many of those instances, institutional investors will simply capitulate and say, “There’s too much uncertainty. I can’t be involved.” And obviously, on the wealth side, it tends to be quite different where they can appreciate the strength of the relationships. When I engage with a lot of advisors, they talk about leveraging AI in a really constructive and productive way that’s franchise enhancing. I’d say from an institutional investor standpoint, they tend to take a little bit more of a glass half empty view at times. And because of that, you’ll have periods where there’s heightened uncertainty and you’ll see significant retrenchment or disengagement on the part of some of the institutional investors. Jason Diamond: I’m struck by as you’re speaking, your work is similar to ours in some sense in that you’re breaking down 30 to 40 companies into the big wealth management names for the purposes of an institutional investor audience. And I guess my question was framed through how does an institutional investor audience compare to a retail investment audience? The reality is we interface with advisors who think about these same questions you do, but through the lens of what firm do I want to work with? So meaning I need to understand what does the future of Raymond James look like, how does Morgan Stanley’s business model going to evolve, how is AI going to impact LPL’s pricing because I’m making a decision about where to move my book of business. Do you guys have an interest in advisor movement, I guess is my first question? Is that something that institutional investors are keen on? Steve Chubak: Very much so, and I feel like that’s actually one of the products that we publish that has among the strongest, if not the strongest, following amongst a lot of our institutional clients because the reality is what dictates the stock price performance for a lot of the wealth managers is in fact organic growth, I would say, first and foremost. And because of that, there tends to be a really significant focus on not just net new asset growth, but also the cost of that asset acquisition. So no one is a bigger expert, at least in areas like transition assistance than you, Jason. So typically, we’re leaning on experts like yourselves, but to get some insight into the TA dynamics, how it’s impacting the returns for the assets that are being acquired or new business that’s being underwritten. And because of that, there tends to be a greater scrutiny amongst the institutional investors increasingly, not just of who has the strongest M&A profile, but who actually has the highest quality M&A profile given that the cost of asset acquisition and advisor recruitment has gone up pretty dramatically in recent years. Jason Diamond: So meaning, and sorry for dumbing this down into second grade mode, meaning if a firm was having a ton of success recruiting, but they were paying 2,000% transition deals, the institutional audience would look at that and say the cost of your net new assets is just not in line with. Is that kind of what you’re getting at? Steve Chubak: That’s exactly right. And it’s funny too because if I think back 5 to 10 years ago, there was a strong investor contingent, and I’d say even the majority of investors who believe that new advisor growth or new store growth, so to speak, was actually higher quality than same store because the cost to recruit wasn’t that high. And at the same time, the investor perception was if you can recruit new advisors to your platform, that means that you run a great platform from a service standpoint, from a technology standpoint. Whereas today, same store unquestionably, just given the heightened scrutiny and focus on transition assistance is certainly perceived to be higher quality. So there are a number of firms that may not be growing their advisor base as much as some of their peers, but the reality is the same store sales growth is so much more powerful that’s translating into better M&A and it’s a cheaper cost of asset acquisition. So that’s, to me, really the efficient frontier that a lot of investors today are solving for is good M&A profile, but not necessarily overpaying for that growth. Jason Diamond: So I assume that’s like the comments we saw at a Morgan Stanley over the weekend or whatever, it was a week ago, basically saying, “Our advisors grow like crazy. We will still recruit effectively, but maybe not as robustly and holistically, but take our swings when…” Is that sort of the ethos here that you think a lot of firms will start to adapt? Steve Chubak: That’s exactly right. And I think it also speaks to the fact that if you look at Morgan Stanley’s net new asset growth and you benchmark it relative to a broader universe of players, including some of the RIAs and independent broker dealers, what we’ve seen is Morgan Stanley’s M&A is best in class and despite the fact that they haven’t added as many advisors, and that really speaks to, frankly, the strength of the workplace funnel. Jason Diamond: The funnel, agreed. I would’ve thought what you started with, which is that a firm that can recruit well has a solid enough platform that they can probably retain advisors. I agree there are some exceptions to that on both sides, firms that do a really good job of recruiting, but they also have people leaving out the back door, and then the flip side is certainly also true. I think we have to talk about AI here. I was going to bury it for a little bit later, but you brought it up, and I think it’s too tied in to this topic. Let’s just start at the top. Overall, with the advent of AI agentic tools, the news you see every single day, you are A, more bullish on the industry than you were a year ago, B, more bearish, C, neutral? Steve Chubak: I’d say I’m moderately bullish. I have to give a nuanced response here in that I know like any typical sell side would where he’s going to have to hedge his bets and throw in a bunch of caveats. But kidding aside, from a advisor productivity standpoint and from a platform efficiency standpoint, I think that AI is a huge boon or windfall for the industry. The one area where we’re more cautious is really around monetization and pricing. And to be clear, this is not a risk that I view as imminent, but over the next 5, 10, 15 years as these tools grow more sophisticated, as it’s easier to optimize some of your idle cash, as it’s easier to at least attract or source services from a wealth standpoint. They’re being offered more cheaply by a fintech provider or some other competitive threat. It’s really that monetization piece that I’m a bit more cautious on, which is why I do think that the industry needs to pivot to a potentially different pricing model where both advisor as well as the firms themselves have aligned incentives where their revenues, their earnings are tied to the same KPIs and metrics and so they can grow together, commensurate with their customers. Jason Diamond: Yeah, I agree with that. I think that’s, in large part, what the shift from brokerage to fee-based was starting to get at. Explain the cash sweep concept because I don’t think everybody in a retail audience is necessarily familiar with this and how important it is. Can you just take a step back and explain cash sweeps and the impact and how broker dealers make money? Steve Chubak: Yeah, sure. I’m not going to go too far down this rabbit hole. I’ll do my best, Jason, to keep it high level. What we’ve seen over the last, call it, five years is multiple instances where cash monetization, so think about a firm, whether it’s LPL or Schwab, where the advisor has anywhere from one to 3% of their client cash that sits idle for transactional purposes, maybe some bill pay, what have you. Maybe there’s some drawdown vehicles where there’s a capital call. But on those cash balances, that is a significant source of profitability for firms like Schwab and LPL. And to provide some context here, we estimate that about 100% of pre-tax income for some of these firms is in fact derived from monetizing client cash. Now, my issue with this, and this has been the case even prior to some of the growing scrutiny around cash monetization as agentic tools, as tokenization has emerged and reared its ugly head, the reality is it is an opaque exchange of value, I would argue, in that the firm is making money, the advisor does not on these cash balances, and the customer does not. And my preference has always been for more transparency and more alignment of incentives where you would have, in the case of a customer, if their AUM is compounding at 15%, the advisor is also going to clip their fee that will hopefully grow commensurate with that over time. And similarly, I want the firms to be participating in that as well where it is a transparent fee. Let’s say it’s a platform fee where you charge five basis points, but instead of earning a 3% spread on these idle cash balances, you’re actually paying much more competitive deposit rates. I think that’s a better alignment of incentives for all the parties that are involved. It’s also a much more transparent approach to fee monetization. And the reality is cash is just not going to grow as quickly as AUM. And because of some of those structural headwinds to growth, I think it makes a lot more sense for companies in lieu of monetizing cash to the extent that they have historically, actually pivoting and replacing that with a three, four, five basis point platform fee. And it actually still yields a better outcome for everyone involved because I think most of the companies that will do it will likely structure it in a earnings neutral to slightly dilutive manner knowing that AUM could actually compound faster over time. That’s where we get a little bit too far in the weeds, but hopefully that offers some helpful context. Jason Diamond: Yeah, no, super helpful. So basically, the concept is right now, firms are paying below market rates on cash, but they’re also not really charging that much in some cases to leverage their platform. So you’re describing a world where they say, “We’ll pay you market competitive rates on cash. That’s more transparent, but we’re a business after all. We’re probably going to have to implement some form of platform fee to offset that.” I agree with that completely. My question for you from an advisor movement perspective is this. Obviously, from the firm perspective, they love that. The scenario you’re explaining, if they could flip a light switch, if LPL or Schwab could flip a light switch tomorrow and go from 100% sweeps revenue to 100% platform fee revenue, I believe they would do it. But there is a concern about how advisor attrition or movement is impacted if and when you implement a platform fee. So what are your thoughts on if a firm does this, do we see a whole bunch of advisors all of a sudden jump ship? You’re going to turn around and ask me the same question. I know. Steve Chubak: No, I know. I was about to say that actually. And you’re certainly familiar with some of the firms that have introduced a platform fee in the past. We saw this a couple of years ago from Rockefeller. I know Ed Jones had introduced one. And what we tried to do actually as part of our advisor migration analysis or advisor on the move analysis is look at whether we saw any evidence of some slowdown in advisor recruitment, some slowdown in organic growth, and there were really no tangible signs of that. I think there were little evidence of any sort of disruption here. I think it speaks to the fact that the advisors recognize that the firms do need to get paid for the services that are being rendered, and at the same time, they’re going to focus more on the platforms that have high-quality service, high-quality tech. I don’t think a three to five basis point platform fee, especially when your clients are getting paid more competitive rates on cash, is going to deter you from joining or affiliating with a specific firm. Jason Diamond: You didn’t ask, but I will give you my perspective. I agree with you. I take a somewhat nuanced approach here, which is there is a big difference between a basis point and six basis points, and I am curious to see… The other piece of this I’m watching closely is the lack of a first mover advantage. So if one firm, let’s say it’s LPL, decides to go this route, do we immediately see a whole bunch of other firms following suit? I think part of that dictates, and how large of a fear, how large of a change are we talking about, probably dictates a lot of the response. As a whole though, I agree with you. I think we probably look at this a year or two years from now and just call it a necessary structural change of something that needed to happen in our industry. Let’s pivot to M&A. It’s been a little bit of a quiet year in terms of major headline news, but at the time of this recording, a couple of weeks back was Altruist Vanguard announcement, which is probably the biggest one I can think of this year being 2026. Give me your thoughts on Altruist Vanguard. What does it mean for Schwab and Fidelity and the RIA space as a whole? Steve Chubak: Yeah, it’s a really interesting transaction. Candidly, it wasn’t one that was on my bingo card for this year. And I should start off by saying I have a tremendous amount of respect for the Altruist team and what Jason has built. The fact of the matter is this has been a really dominant oligopoly for an extended period of time within the RIA space. They’re one of the few names that were really able to break in, but they’ve been able to have success with that smaller RIA cohort. And I believe there are about 6,000 some odd advisor teams that are on the platform. I haven’t seen explicit AUC numbers, but I believe that the average size is about anywhere from 100 million plus or minus. That would imply about 50 to 75 billion of aggregate AUC on the Altruist platform. And for context, that equates to about 1% of AUC at Schwab. I’d also point out that Schwab has actually recruited more in AUC in each of the last two quarters than the aggregate size of Altruist, just to offer some perspective here. So while I do think Altruist is going to have some success moving up market, they benefit from being able to leverage deep pockets. They certainly are known for being a very tech-forward firm, so I do think they’re going to have success. At the same time, I think they’re going to have success with some of those smaller RIAs still, and Schwab is going to continue to have a fairly dominant position amongst some of the larger RIA teams. Jason Diamond: Is that because Schwab, and let’s call it Fidelity as 1A or 1B, is that because they’ve just become kind of the default options or is there something you feel that they just do better than everybody else? Steve Chubak: I think the breadth of the offering is something that’s really unmatched, and actually, we just had the opportunity to meet with Schwab management. I thought Rick actually articulated that really well. I think he’s also keenly aware of some of the products that are in very strong demand and doing what’s needed to try and offer that in a responsible way. And probably the best example here would be the RIA long short offering, which AQR popularized, which is the demand is incredibly strong. We’ve seen a number of firms that have slowed the pace of growth of late, and that’s simply to manage around some operational difficulties like sourcing some of the borrow. I don’t want to get too in the weeds here, but that’s an example of the type of product where there’s strong RIA demand and Schwab found a way to offer it, and they’re still focused on still being responsible about growing said product, but at the same time, still having that as a driver of accelerating RIA flows. And that’s one of the reasons why even since the Altruist Vanguard deal was announced, what we’re seeing and hearing suggests that RIA flows, at least on the Schwab platform, have remained incredibly robust and resilient throughout. Jason Diamond: So let me ask you this question. I’m going to put you on the spot here. It sounds, based on your comments, there’s some firms, particularly the bigger firms, that you are bullish on. Do you agree with this statement that in 10 years, let’s say, whatever the timeframe is, the wealth management world is dominated by Morgan in the W2 space, Schwab in the independent space, and maybe LPL in the broker dealer space. Is that the world we’re heading towards? Steve Chubak: Yeah, I do think that those three names across those individual channels are going to be consolidators of share. I just think Morgan Stanley, in particular, it’s certainly viewed as the strongest platform within the wirehouse channel amongst many of the investors we engage with. I think they were certainly the most innovative when it came to deploying AI, and every time I engage with Jed about some of their efforts on the technology side, they are clearly pioneers in many different areas. I think Workplace in particular is probably the channel that I’m most bullish on in terms of value prop, growth prospects, but also the cost of asset and acquisition being so much lower within that channel. And so, I feel like they built a really strong ecosystem there. LPL, similarly, I think has just been very innovative in their approach within the IBD channel, whether it’s liquidity and succession, whether it’s their strategic wealth services offering, which serves as somewhat of a hybrid offering to attract some of those wirehouse advisors, and they’ve done a really nice job there. Then, from Schwab’s perspective, they are the behemoth in the RIA space, but I think because of the breadth of the offering, because of the investments they’re making on the technology side, as well as on the product side, that’s going to enable them to have a really dominant position. I think the beauty of Schwab’s competitive position is that even if they’re growing in line with the rest of the RIA industry, that’s still going to support high single-digit to low double-digit AUC growth year to year, just given the structural tailwinds in terms of migration from W-2 to independent, no one knows this better than you, Jason, remains firmly intact. Jason Diamond: It’s hard to poke holes in anything you said. It does feel a little bit like the rich get richer. Again, not to put you on the spot, but will you venture some maybe bearish names, or even if you don’t want to give names, any pockets of the industry that are causing you some anxiety or concern right now? Steve Chubak: I’m always more cautious just on… I mean, this is the opportunity, admittedly, for many of the public names that I cover. On a lot of the PE sponsor-backed names, I always just question, given higher levels of leverage that they employ, particularly in a higher for longer interest rate backdrop as we’re bracing for incremental hikes, and then just questions around what the end game is for some of the private equity firms that actually own many of these names. I don’t necessarily feel like they have the same long-term commitment to match some of the others, and therein lies the opportunity for the likes of whether it’s LPL or Ray Jay to potentially recruit from some of those firms. I think one of the really interesting debates that’s happening now, Jason, is there are some firms that have drawn a clear line in the sand. Whether it’s in Ameriprise, I might even throw Stifel into the mix, that have said, “We are not going to compete with some of these aggressive TA packages. We just don’t believe that the returns, the paybacks are sufficiently compelling.” Whereas there are quite a few other firms, whether it’s LPL, Raymond James- Jason Diamond: Ray J. Steve Chubak: … indicated to us that they can still underwrite a lot of these advisor teams to very attractive IRRs, attractive paybacks, and because of that, they’re going to continue to recruit and recruit fairly aggressively. So there’s definitely different stances that some of the individual firms have taken. They’re still all very committed to the space. I think the willingness to at least match some of the more aggressive TA offers that are out there, we’ve definitely seen greater dispersion on that front. Jason Diamond: So who’s right? I have a very clear point of view. I’ll go first. I believe that firms have been making fun of how high TA have been when they were 100% in W-2 land. So to me, it’s like I use the old quip of democracy is the worst form of government besides all others. TA is the worst form of recruiting besides all others. Who is right? Do you believe that the cautious capitals expensive approach is ultimately going to bear fruit long-term or is it better just to write these ever-increasing recruiting deals? Steve Chubak: No, I do think the firms need to employ discipline here, and there is an efficient frontier that can be had. So this is something we actually unpacked recently after we met with LPL management. And to be clear, this is not their view. This is my personal view and my team’s view that I don’t necessarily need to see LPL grow organically 10% and, as a result, see much weaker free cash flow conversion because that’s something that is getting increasingly scrutinized by the investor community. And so, for us, the efficient frontier is still healthy levels of organic growth at, let’s call it, mid to high single-digit, but being able to marry that with strong free cash flow conversion, what we’ve seen historically is if you have a good balance of both of those items, it’s typically translated into better stock performance, better earnings growth over time. And so, I do think that there’s a balance here to be had. It’s not simply try to maximize TA, match the most competitive offers that are out there in the marketplace. You do have to strike a balance where you still want to continue to grow, focus on organic growth, but not necessarily try to maximize organic growth at the risk of weaker free cash flow conversion. Jason Diamond: I heard an interesting quote on this from a unnamed executive at an unnamed big firm who basically said, “If you are the firm that writes the biggest check, you get the advisors that chase the biggest check.” And I think there’s something to that too, is that firms have become a little bit, I don’t know, gun shy is the right word, but a little bit mindful of the fact that the type of advisor who is likely to take a big check or the biggest possible check is also potentially the type of advisor that might move again. And I’m not villainizing taking the check. I believe advisors deserve to be compensated. It’s risky to move, it’s a hassle to move, but I do think we’re seeing, from our perspective, firms are definitely getting more selective. I don’t know if it’s because cash has gotten more expensive, just because there is a lot of scrutiny on this, but firms are definitely getting more selective about how they deploy max TA packages, max transition assistance packages. Do you agree? Steve Chubak: I certainly agree, but now, Jason, it’s my opportunity to put you on the spot since I’m curious as some of these firms have to underwrite TA packages that have a very long duration, and we are entering a period where agentic AI is front and center. And there’s a lot of concern that firms aren’t going to adequately handicap the risk of monetization pressures, whether that’s lower fee rates on advisory fees over time. I’m not speaking over the next year or two, but given the long duration of some of these TA agreements, how are companies at least handicapping that risk? Jason Diamond: I think it’s a very real risk for deals that were put on the books before firms had any of this on their radar in particular. That’s what I worry about. I think now, firms have a pretty good sense that this is coming, some of these cash dynamics you’re talking about, potentially even some of these AI risks where their advisors are just going to be slightly less profitable. But I do worry a little bit about firms that wrote 11 to 13-year deals four years ago. I will say this, the bull market has solved for a lot of this headache because advisors who grow just make these deals attractive. That’s what we’ve seen is that even these deals that seemed expensive at the time, we’ve seen astronomical growth from some advisors, X market even at a lot of these firms, and then those deals look good in hindsight. I absolutely worry that if we see a prolonged or a sustained kind of neutral to down market, I think these firms wrote deals to high enough IRR numbers that I’m not like, “Oh my God, I’m crying poor.” But I could see a world where firms have to take a write-down on some of their recruits like they’re just not as profitable as they originally envisioned. What are your thoughts? Steve Chubak: Yeah, I think that’s right. We’ve done the IRR math ourselves. I think what we’ve seen, I alluded to some of these numbers earlier, payback periods have probably been extended by about a year. The IRRs have contracted by about 500 basis points, but there are names that could still underwrite to IRRs that are in the upper teens to 20% type range. And I should also note that analysis, since I want to be completely transparent, I had a bunch of clients who complained about it because we evaluated it on a timeline of seven years, but there are advisors who are going to stay on the platform beyond the TA agreement. And if anything, that maybe understates at least some of the returns that can be underwritten by these firms over time. Jason Diamond: Absolutely agree. And I think, look, I don’t worry, at least this is my personal view, I don’t so much worry about the fee compression risk of the agentic just because I think firms have gotten really good at avoiding it. I do worry a little bit about are advisors going to have to start offering a lot more? Are you going to need bigger teams? Just things that, in general, impact firm profitability. But I have a hard time believing. I’d be curious to hear your thoughts. Do you think there’s a world where advisors who are now charging 1% to clients are all of a sudden going to have to start charging 30 bps because of AI? Steve Chubak: I think there’s going to be some marginal pricing pressure, particularly in areas like brokerage. The beauty is that we’ve already been seeing over the last 5 to 10 years a migration to advisory where the pricing and fee rates are much more resilient. And it’s one of the reasons why if you look at asset management fee rates, since the emergence of passive ETFs, they’ve only moved in one direction and that’s steadily lower. Whereas on the wealth side, while brokerage fee rates have come down, what we’ve actually seen on the advisory side is far greater resiliency over time. So that does instill some greater confidence, at least on our part, that the pricing is going to be more resilient. I’d also point out that a lot of the products that are in much stronger demand, someone who covers the alts, certainly the growth in retail alternatives, the proliferation of retail alts, despite some of the recent agita and concerns around the BDC space, the reality is private equity, secondaries, infra funds, they’re in very strong demand. They do generate uncorrelated returns, and especially given how active a lot of these firms will be, and this is where we’re spending a lot of time now in fact, Jason, on the AI data center financing opportunity that as more money is allocated by the retail community to alternatives, that’s also accretive for pricing and for earnings for a lot of the firms as well. So there’s a lot of different trends that we’re seeing in terms of product demand, where companies are pivoting to. And I think Schwab is the best example here where their revenue as a percentage of client assets, which to me is really the litmus test or barometer for how much value you’re providing to the end client, they stack up as best in class on that front. But it also speaks to the fact that they probably have more room to adjust pricing, and they’ve done that in select areas. They’ve raised the SAN threshold, for example, and they’ve taken those actions to at least protect and preserve some of their pricing power, which frankly, I think they’ve earned just given the sheer amount of value they offer based on this metric. Jason Diamond: The other concern we hear, and maybe you don’t model out this far, the other concern we hear is, I agree. My parents are 60 years old, and my advisor can keep charging my parents 1%, but eventually, the kids are going to take over the money and they’re going to have a very different experience with the advisor, with the money, with the fee relationship. Do you give any thought to that, that there’s this great wealth transfer that could be 20 years from… I mean, you have to put some weight to that if you’re modeling out discounted cash flow stock prices, right? Steve Chubak: No, I think that’s certainly fair. Now, at the same time, there are some historical paradigms that do give me some comfort here. So the best example would be the emergence of robo-advisors. And I remember back in 2013 where everyone expected that 20% of millennial assets were going to be managed in some sort of robo offering, and that number today I believe is about 1%- Jason Diamond: Really? Steve Chubak: … of what source you use of the aggregate retail TAM over a decade later. So I think what we’ve learned over time is that people do value advice, human intervention. I know there’s a lot of advisors in the audience. We’re not just at least trying to appease them. I think there’s clear evidence based on some of the historical trends that people want human advice. They want at least some human participation to help even from a handholding perspective. And I will tell you as someone who tried to leverage at least an LLM recently to forego having to pay a lawyer, I got about 75 to 80% of the way there. And that last 20%, I was incredibly uncomfortable and made the determination that DIY might not be the right approach for that sort of thing. And I feel, frankly, similarly on advice that there’s a lot of tax optimization and complexity. There’s a lot of complexity around trusts where people don’t necessarily want to delegate that simply to an agentic tool. Jason Diamond: So you just nailed it, and I love the lawyer analogy because I think it’s high-level professional services, and I think this is more true, the larger your client base is in terms of average clients like more sophisticated clients. I just feel we have this moat and this kind of immunity to a lot of this, and somebody’s going to play this back in 10 years and laugh at me in the face, but to me, it feels like an area. It’s not like my Fios box broke, and I’m okay. I’m comfortable with an AI agent there. It feels like an area that is insulated because to your point, that last 20% is what matters the most and it’s what people seem to value. It gives me comfort too, I will say. We’ve got time for a few more. You mentioned KPIs, key performance indicators. When you look at a company, let’s say I give you two minutes with the company’s financials, what do you look at? What does your mind immediately go to? Is there a certain metric or metrics that you think are the most telling these days? Steve Chubak: Sure. Organic growth first and foremost. As much as I wish that if any of the companies are listening, that they would break out same store versus new store growth, frankly, there’s just been less disclosure around that given some of the heightened competition, but even organic growth at the headline level is certainly something that we focus on. Operating leverage, so as revenues continue to scale, it’s nice that we’re in a bull market. It’s nice that there are significant interest rate tailwinds that are benefiting these firms, but how are they striking that balance between investing for growth and allowing some of that windfall to hit the bottom line? We usually like to see a better balance there. If a company’s compounding revenues at 15% and growing expenses at 2% and the rest of the competition is growing at 5 to 8% in terms of cost growth, that’s something that does not sit well with us because that is a temporary boost to earnings that certainly isn’t going to be durable or sustainable. Jason Diamond: Let me ask you two more questions. I think you and I first started speaking about cash sweeps. It’s probably 18 months ago, which is certainly long before it was on the radar of a lot of advisors and clients. Do you have something else that’s in the back of your mind as this is the next big thing that people aren’t talking enough about? Steve Chubak: I do think this is certainly the next shoe to drop, just given even what’s taking place today with the reaction to the number or the quantum of Meta Muse downloads and what the implications are for financial services broadly. The wealth names are selling off a bit more than some others. You actually saw some insurance brokers sell off yesterday. So anyone that is in services industry or in financial services where there’s a perception that there might be some risk to pricing or monetization, there is certainly an acute sensitivity to that amongst investors at the moment. I would say there are a lot of interesting dynamics that we’re looking at certainly ahead of our wealth conference. I would say certainly, to self-clear or to not self-clear as some of these larger firms continue to scale because do you want to have full ownership of the data? Do you want to ensure that you can maintain all of the different monetization streams within your ecosystem rather than at least having some of that go to the Pershings or Broadridges of the world? I think it’s a really interesting debate just given how valuable that data becomes in an AI world and some of the self-clearing entities potentially being able to leverage that. I’ve never really seen a sufficiently compelling value prop where a firm would go down the path of something that’s highly disruptive like converting to self-clearing. We’ve seen only a handful of instances where that’s happened, but I do think AI and, frankly, the importance of data is changing at least some of that calculus for different firms. Jason Diamond: Yeah. And I think maybe some of the Commonwealth LPL reaction too, I’m seeing some of the non-self-clearing reaction there, too. Commonwealth LPL somewhat intentionally because I want to end with, we spoke a little bit about M&A in the light of Vanguard, but I think going into the year, there were some thoughts of there’s some names. You mentioned Stifel. We’ve talked a little bit about UBS, a little bit about Citi. There’s some names that make sense, at least maybe a little bit. Any M&A news that you’re watching either this year or further ahead? Steve Chubak: It’s a little tough, Jason, because I am precluded from putting any companies in play, but I’ll least speak to what’s been put out in the public domain. Look, for a company like Stifel, I know that there was certainly some speculation that Raymond James might be interested. I don’t know. Ron K. seems to be very happy with what he’s doing. In fact, even at our conference last year in JESS, he took a fake phone call from a journalist to say we’re not for sale. Jason Diamond: I remember that. Steve Chubak: It is something where we’ve seen a number of firms like that that are trading at 10 times, and this is an earnings number, not even EBITDA multiple. So 10 times earnings, historically very discounted multiples. Some of that I think is a function of the AI concerns that are percolating in the marketplace, but if anything, there’s never been a better time to at least source attractive targets in the wealth space, at least in the public domain, given the multiples that the group is trading at today. I think that’s one of the bigger surprises too, Jason, since you mentioned a couple of other things we’re thinking about that come to mind. One, I mentioned Workplace, and there aren’t a lot of obvious corporate stock plan targets, but I do think there are quite a few firms that we’ve spoken with who want to be larger in the retirement space. And so, I do think that’s an area where you might see firms look to expand inorganically over time. That certainly wouldn’t surprise me given it’s still highly fragmented, and there are a lot of scale players in the wealth space that are still too small within retirement specifically. So that’s certainly something that we are monitoring quite closely. The last thing I’d say about just wealth M&A in general, at least amongst strategics versus, say, some of the PE or sponsor-backed purchasers, you have to buy it twice, right? Jason Diamond: Twice. Steve Chubak: That’s always the hesitancy or reluctance on the part of some of the public names in acquiring a strategic or public competitor is the fact that you’re buying the property, and then you also have to retain all the advisors. And when you actually layer all of that into the deal consideration, some of these deals start to get much too expensive. But we still see quite a few acquisitions, at least amongst the privates. I think the biggest surprise to me is that we haven’t seen more convergence yet between private and public multiple in the wealth space. Jason Diamond: Yeah, we’ve seen a couple take privates. Yeah, I don’t disagree with you. I just thought of another one that I want to end on. This is a quick bonus round question. Steve Chubak: Of course. Jason Diamond: What is the number one inbound topic you get? Is it AI? It is for us these days. I’m just curious. Steve Chubak: It is primarily AI. I think it’s really about all of the game theory, candidly, Jason, that we had walked through where whether it’s LPL has been speculated as potentially being a first mover on making changes to cash monetization, the reality is that certainly, someone else could be that brave soul that ends up being the first mover here instead of LPL, but trying to think through the game theory in terms of how do other firms respond? Does this drive broader sweeping changes in terms of pricing? Is it isolated just to the IBD channel, or does it extend to the wires and the pure RIAs as well? There’s a lot of really interesting debate that’s taking place on that front. It’s all AI or AI adjacent. I would just say that it’s definitely cash, but it’s also the game theory and the knock-on effects for others that’s getting quite a bit of focus too that people are trying to navigate here. Jason Diamond: Yeah, that’s exactly what I was going to say, the knock-on effects because it’s, okay, fine, we have this giant topic of AI, but then gaming out how it’s going to impact cash sweeps and monetization and advisor fees and advisor productivity and advisor movement, that’s where the fun begins. So we’ll have to invite you back. This is a topic that’s evolving very rapidly. So I know next year, we’ll probably have an entirely new slate of topics to talk about, but this has been a ton of fun and a really interesting different perspective from a largely institutional seat. So thank you for sharing your wisdom and expertise with us, Steve. It was a pleasure. Steve Chubak: You’ve been a tremendous partner of ours too, so thanks so much for having me on and always enjoy engaging on this topic. Goes without saying. Jason Diamond: Thank you. Mindy Diamond: As a financial advisor, you hold yourself to the highest standards of integrity, honesty, and credibility. You are successful because you take your professional responsibility seriously and are dedicated to your clients. But are you living your best business life? Are your goals aligned with your firms or could a better option exist? Should I Stay or Should I Go? is a book written with you in mind. It’s a self-guided journey that walks you through the key steps that we take with our advisor clients. This strategic thought process and roadmap to professional self-discovery is designed to help you ask the right questions and think critically and objectively, whether you’re considering change or not. Learn how to get your copy at diamond-consultants.com/thebook. Deep Research: How Smart Money Evaluates Wealth Management Firms A conversation with Jason Diamond and Steve Chubak, Managing Director at Wolfe Research.      Jason Diamond: Welcome to the latest episode of our podcast series for financial advisors. Today’s episode is Deep Research: How Smart Money Evaluates Wealth Management Firms. It’s a conversation with Steve Chubak, managing director at Wolfe Research. I’m Jason Diamond, and this is the Diamond Podcast for Financial Advisors. Mindy Diamond: At Diamond Consultants, we help lead advisors identify the right environment for their businesses to thrive, whether that’s at a wirehouse, boutique, or independent firm. With nearly three decades of experience, we’ve guided thousands of advisors and represented more than a quarter of a trillion dollars in assets transitioned. And each year, one in four advisors managing a billion dollars or more who change firms are our clients. Our process is education driven and based on building relationships, starting as your strategic partner well before you’re even thinking of a move. To schedule a confidential conversation, call us at 908-879-1002. Wondering why advisors change firms and where they’re headed? Are transition deals going up or down? Those very questions and more inspired us to create our annual advisor transition report. It’s the award-winning data-driven resource designed for advisors that connects the dots between the motivations around movement and the firm’s appetite for top talent. Arm yourself with the knowledge you need to make smart decisions. Download your copy at diamond-consultants.com/transitionreport. Jason Diamond: Financial advisors have plenty of reasons to take a closer look at the wealth management landscape. They may be considering a change of firms or models, evaluating an equity partner, or simply trying to understand whether their current firm is positioned for the future. And when they do, they tend to look at it through a very specific lens. What will this platform allow me to do for my clients? How will it support my business? And does it give me what I need to grow? Institutional investors look at many of those same firms through a very different lens. My guest today, Steve Chubak, is a managing director at Wolfe Research, where he and his team cover the wealth management ecosystem, from wirehouses and regional firms to custodians, broker dealers, and alternative asset managers. His job is to understand not just how these businesses are performing today, but what their performance metrics and key data points tell us about where they may be headed. And that’s where I think this conversation gets especially relevant for advisors, because whether you’re analyzing a company as an investment or evaluating it as a place to build your business, many of the underlying questions are surprisingly similar. Is the growth durable? What is the firm spending to generate it? How effectively is it investing in technology? And what could disrupt its economics over time? Steve offers an institutional perspective on all of it, including why organic growth may tell us more than headline recruiting numbers, what AI could mean for advisor productivity and fees, the changing economics of cash, and how M&A and consolidation could reshape the competitive landscape. It’s a different way to look at the firms advisors work for, partner with, and consider joining, and at what may ultimately separate the strongest wealth management businesses from the rest. So let’s do it. Steve, thanks so much for joining us. Thrilled to have you here. Steve Chubak: No, it’s great to be here. Really appreciate the opportunity to participate. It goes without saying, longtime fan of the podcast, so nice to finally be on. Jason Diamond: Longtime listener, first-time caller, let’s get going. Before we talk about the business side of things, I want to talk about your background, a little bit of a different flavor of guests for us. So tell us what brought you to the world of research, to the world of wealth management. How’d you end up here? Steve Chubak: Yeah, sure. So I graduated from NYU Stern in undergrad. Most of the folks in my class either went into investment banking or markets. In fact, very few went into research. I myself embraced at least the trading side, but realized over time, I actually had a real passion for doing fundamental analysis on stocks. And I realized this passion in 2008, mind you, where there weren’t a ton of job opportunities at the time as I was making that career pivot. But the beauty of the research side is I get to really engage with some of the smartest investors on the planet day-to-day, unpacking really challenging topics. And specific to the wealth management space, I think what’s really unique about the franchise that we’ve built there is most of my competitors might cover a sleeve of companies within the wealth spectrum. We actually cover the whole ecosystem. So we’re one of the few teams and maybe the only team that covers the wirehouses, the regional brokers, the trading shops like IBKR and Schwab, as well as some of the alternative asset managers. So whether it’s the product side or whether it’s the firms that are providing the platforms, we can cover the whole ecosystem. And it’s just an incredibly dynamic space with TAMs that have really powerful structural growth tailwinds. So never a dull moment. Even today, we’re seeing a selloff in the space around some of the concerns around the Meta Muse launch. And look, it always keeps us on our toes. It always keeps us busy and engaged. Jason Diamond: Absolutely. So there’s a lot to unpack there. I want to just take a baby step back and do the five-year-old version of this. Fair to say, your company covers single stocks from a research perspective. Do you also do anything on the industry as a whole, macro, more broad, just so we know what we’re focusing on today? Steve Chubak: Yeah, sure. Because we’ve spent so much time really unpacking all the trends that are really influencing the wealth space today, we do spend a lot of time publishing deep dive industry reports on the wealth names. We’ll do it when we have the opportunities to engage with management. So we did that recently with LPL and Schwab, but we also host a wealth symposium every year and publish a wealth management primer alongside that. It leverages a lot of industry data. Frankly, it leverages some of the pieces that even you guys have published in the past, but really, just trying to analyze the whole ecosystem to take a more holistic view on what some of the growth opportunities are, but also some of the emerging risks that are impacting the space. Jason Diamond: No doubt. With all that said, I think your lens, at least as I see it, is a little different than our typical advisor. Are you spending your day interfacing with these companies, meaning talking to management of LPL, of Raymond James, of Schwab, and trying to get the picture of what’s working, what’s not working? What does the role involve in real words? Steve Chubak: I would say that engaging with the management teams probably composes about 20% of our day, if that. Most of our engagement is in fact with institutional investors that are looking to invest in the space. So someone that is interested in Morgan Stanley but wants to understand the workplace offering, and we’ll schedule a 30 to 45-minute call. We’ll unpack some of our prior research. They’ll ask for certain custom requests, so we can try and extrapolate what the growth is going to look like for that particular segment. And you can really apply that to any of the companies in the wealth space. So it’s always dynamic. From a bottom-up perspective, each of these companies are quite different. They operate in different channels. There’s no shortage of topics to unpack, but I’d say most of the engagement that we do and most of our time is really spent on the research product and engagement with institutional investors. We do speak regularly with the companies, but that’s probably about 10 to maybe 20% of our day. Jason Diamond: That’s what strikes me in talking to you is you take a institutional lens to a pretty retail environment, meaning the business itself skews certainly retail. What is it that surprises you? Let’s start with something maybe not spicy, but a little bit out of the gates with some punch to it. When you talk to institutional investors and then obviously, you spend your day in the world of retail, what surprises you most about that kind of juxtaposition? Steve Chubak: I think the biggest surprise to me is just the level of detail orientation that we get from our institutional investors. The expectation is if we’re going to cover 35 to 40 names, we are going to know these names inside and out. We’re going to have deep familiarity with the history. We’re going to understand the game theory in terms of how the landscape is going to evolve. And certainly when you have these dynamic themes like agentic AI that are getting introduced or injected into the space, that’s sparking quite a bit of controversy and debate, but the expectation is we have to unpack that game theory. We have to understand how each company is competitively positioned. And in that regard, we are going quite a bit deeper. I would say what’s similar to wealth management is that it’s not so much, even though there’s a strong relationship component that exists for both, I would say that on the wealth management side, you’re taking a much more holistic view of your client, of your customer, where it’s not simply trying to get the portfolio asset allocation right. It’s also about understanding the family needs, how can you optimize from a tax standpoint, what are the lending products that you can offer, so I’d say the service that’s being offered is much broader, whereas for the institutional investors, I think the expectation is narrower focus, but we’re going to go much deeper. Jason Diamond: Yeah, that makes a lot of sense to me. I guess what I’m kind of getting at is, do you feel like the retail audience misses something that you see that your institutional audience just gravitates towards? Is there something, or maybe it’s the other way around? Maybe it’s the institutional guys could learn from the retail guys. I don’t mean to lead the witness, but I think you have this unique seat where you straddle both worlds. Steve Chubak: It’s a great question, and I’d say that it’s probably applicable to both. There’s certainly some elements I’d say institutional investors do underappreciate because they’re so deep in the numbers. There are times when they are myopically focused on the numbers. And the reality is too, when there’s periods of uncertainty, and I know we’ll talk about this in a moment, what the implications are for AI on pricing, on cash monetization, in many of those instances, institutional investors will simply capitulate and say, “There’s too much uncertainty. I can’t be involved.” And obviously, on the wealth side, it tends to be quite different where they can appreciate the strength of the relationships. When I engage with a lot of advisors, they talk about leveraging AI in a really constructive and productive way that’s franchise enhancing. I’d say from an institutional investor standpoint, they tend to take a little bit more of a glass half empty view at times. And because of that, you’ll have periods where there’s heightened uncertainty and you’ll see significant retrenchment or disengagement on the part of some of the institutional investors. Jason Diamond: I’m struck by as you’re speaking, your work is similar to ours in some sense in that you’re breaking down 30 to 40 companies into the big wealth management names for the purposes of an institutional investor audience. And I guess my question was framed through how does an institutional investor audience compare to a retail investment audience? The reality is we interface with advisors who think about these same questions you do, but through the lens of what firm do I want to work with? So meaning I need to understand what does the future of Raymond James look like, how does Morgan Stanley’s business model going to evolve, how is AI going to impact LPL’s pricing because I’m making a decision about where to move my book of business. Do you guys have an interest in advisor movement, I guess is my first question? Is that something that institutional investors are keen on? Steve Chubak: Very much so, and I feel like that’s actually one of the products that we publish that has among the strongest, if not the strongest, following amongst a lot of our institutional clients because the reality is what dictates the stock price performance for a lot of the wealth managers is in fact organic growth, I would say, first and foremost. And because of that, there tends to be a really significant focus on not just net new asset growth, but also the cost of that asset acquisition. So no one is a bigger expert, at least in areas like transition assistance than you, Jason. So typically, we’re leaning on experts like yourselves, but to get some insight into the TA dynamics, how it’s impacting the returns for the assets that are being acquired or new business that’s being underwritten. And because of that, there tends to be a greater scrutiny amongst the institutional investors increasingly, not just of who has the strongest M&A profile, but who actually has the highest quality M&A profile given that the cost of asset acquisition and advisor recruitment has gone up pretty dramatically in recent years. Jason Diamond: So meaning, and sorry for dumbing this down into second grade mode, meaning if a firm was having a ton of success recruiting, but they were paying 2,000% transition deals, the institutional audience would look at that and say the cost of your net new assets is just not in line with. Is that kind of what you’re getting at? Steve Chubak: That’s exactly right. And it’s funny too because if I think back 5 to 10 years ago, there was a strong investor contingent, and I’d say even the majority of investors who believe that new advisor growth or new store growth, so to speak, was actually higher quality than same store because the cost to recruit wasn’t that high. And at the same time, the investor perception was if you can recruit new advisors to your platform, that means that you run a great platform from a service standpoint, from a technology standpoint. Whereas today, same store unquestionably, just given the heightened scrutiny and focus on transition assistance is certainly perceived to be higher quality. So there are a number of firms that may not be growing their advisor base as much as some of their peers, but the reality is the same store sales growth is so much more powerful that’s translating into better M&A and it’s a cheaper cost of asset acquisition. So that’s, to me, really the efficient frontier that a lot of investors today are solving for is good M&A profile, but not necessarily overpaying for that growth. Jason Diamond: So I assume that’s like the comments we saw at a Morgan Stanley over the weekend or whatever, it was a week ago, basically saying, “Our advisors grow like crazy. We will still recruit effectively, but maybe not as robustly and holistically, but take our swings when…” Is that sort of the ethos here that you think a lot of firms will start to adapt? Steve Chubak: That’s exactly right. And I think it also speaks to the fact that if you look at Morgan Stanley’s net new asset growth and you benchmark it relative to a broader universe of players, including some of the RIAs and independent broker dealers, what we’ve seen is Morgan Stanley’s M&A is best in class and despite the fact that they haven’t added as many advisors, and that really speaks to, frankly, the strength of the workplace funnel. Jason Diamond: The funnel, agreed. I would’ve thought what you started with, which is that a firm that can recruit well has a solid enough platform that they can probably retain advisors. I agree there are some exceptions to that on both sides, firms that do a really good job of recruiting, but they also have people leaving out the back door, and then the flip side is certainly also true. I think we have to talk about AI here. I was going to bury it for a little bit later, but you brought it up, and I think it’s too tied in to this topic. Let’s just start at the top. Overall, with the advent of AI agentic tools, the news you see every single day, you are A, more bullish on the industry than you were a year ago, B, more bearish, C, neutral? Steve Chubak: I’d say I’m moderately bullish. I have to give a nuanced response here in that I know like any typical sell side would where he’s going to have to hedge his bets and throw in a bunch of caveats. But kidding aside, from a advisor productivity standpoint and from a platform efficiency standpoint, I think that AI is a huge boon or windfall for the industry. The one area where we’re more cautious is really around monetization and pricing. And to be clear, this is not a risk that I view as imminent, but over the next 5, 10, 15 years as these tools grow more sophisticated, as it’s easier to optimize some of your idle cash, as it’s easier to at least attract or source services from a wealth standpoint. They’re being offered more cheaply by a fintech provider or some other competitive threat. It’s really that monetization piece that I’m a bit more cautious on, which is why I do think that the industry needs to pivot to a potentially different pricing model where both advisor as well as the firms themselves have aligned incentives where their revenues, their earnings are tied to the same KPIs and metrics and so they can grow together, commensurate with their customers. Jason Diamond: Yeah, I agree with that. I think that’s, in large part, what the shift from brokerage to fee-based was starting to get at. Explain the cash sweep concept because I don’t think everybody in a retail audience is necessarily familiar with this and how important it is. Can you just take a step back and explain cash sweeps and the impact and how broker dealers make money? Steve Chubak: Yeah, sure. I’m not going to go too far down this rabbit hole. I’ll do my best, Jason, to keep it high level. What we’ve seen over the last, call it, five years is multiple instances where cash monetization, so think about a firm, whether it’s LPL or Schwab, where the advisor has anywhere from one to 3% of their client cash that sits idle for transactional purposes, maybe some bill pay, what have you. Maybe there’s some drawdown vehicles where there’s a capital call. But on those cash balances, that is a significant source of profitability for firms like Schwab and LPL. And to provide some context here, we estimate that about 100% of pre-tax income for some of these firms is in fact derived from monetizing client cash. Now, my issue with this, and this has been the case even prior to some of the growing scrutiny around cash monetization as agentic tools, as tokenization has emerged and reared its ugly head, the reality is it is an opaque exchange of value, I would argue, in that the firm is making money, the advisor does not on these cash balances, and the customer does not. And my preference has always been for more transparency and more alignment of incentives where you would have, in the case of a customer, if their AUM is compounding at 15%, the advisor is also going to clip their fee that will hopefully grow commensurate with that over time. And similarly, I want the firms to be participating in that as well where it is a transparent fee. Let’s say it’s a platform fee where you charge five basis points, but instead of earning a 3% spread on these idle cash balances, you’re actually paying much more competitive deposit rates. I think that’s a better alignment of incentives for all the parties that are involved. It’s also a much more transparent approach to fee monetization. And the reality is cash is just not going to grow as quickly as AUM. And because of some of those structural headwinds to growth, I think it makes a lot more sense for companies in lieu of monetizing cash to the extent that they have historically, actually pivoting and replacing that with a three, four, five basis point platform fee. And it actually still yields a better outcome for everyone involved because I think most of the companies that will do it will likely structure it in a earnings neutral to slightly dilutive manner knowing that AUM could actually compound faster over time. That’s where we get a little bit too far in the weeds, but hopefully that offers some helpful context. Jason Diamond: Yeah, no, super helpful. So basically, the concept is right now, firms are paying below market rates on cash, but they’re also not really charging that much in some cases to leverage their platform. So you’re describing a world where they say, “We’ll pay you market competitive rates on cash. That’s more transparent, but we’re a business after all. We’re probably going to have to implement some form of platform fee to offset that.” I agree with that completely. My question for you from an advisor movement perspective is this. Obviously, from the firm perspective, they love that. The scenario you’re explaining, if they could flip a light switch, if LPL or Schwab could flip a light switch tomorrow and go from 100% sweeps revenue to 100% platform fee revenue, I believe they would do it. But there is a concern about how advisor attrition or movement is impacted if and when you implement a platform fee. So what are your thoughts on if a firm does this, do we see a whole bunch of advisors all of a sudden jump ship? You’re going to turn around and ask me the same question. I know. Steve Chubak: No, I know. I was about to say that actually. And you’re certainly familiar with some of the firms that have introduced a platform fee in the past. We saw this a couple of years ago from Rockefeller. I know Ed Jones had introduced one. And what we tried to do actually as part of our advisor migration analysis or advisor on the move analysis is look at whether we saw any evidence of some slowdown in advisor recruitment, some slowdown in organic growth, and there were really no tangible signs of that. I think there were little evidence of any sort of disruption here. I think it speaks to the fact that the advisors recognize that the firms do need to get paid for the services that are being rendered, and at the same time, they’re going to focus more on the platforms that have high-quality service, high-quality tech. I don’t think a three to five basis point platform fee, especially when your clients are getting paid more competitive rates on cash, is going to deter you from joining or affiliating with a specific firm. Jason Diamond: You didn’t ask, but I will give you my perspective. I agree with you. I take a somewhat nuanced approach here, which is there is a big difference between a basis point and six basis points, and I am curious to see… The other piece of this I’m watching closely is the lack of a first mover advantage. So if one firm, let’s say it’s LPL, decides to go this route, do we immediately see a whole bunch of other firms following suit? I think part of that dictates, and how large of a fear, how large of a change are we talking about, probably dictates a lot of the response. As a whole though, I agree with you. I think we probably look at this a year or two years from now and just call it a necessary structural change of something that needed to happen in our industry. Let’s pivot to M&A. It’s been a little bit of a quiet year in terms of major headline news, but at the time of this recording, a couple of weeks back was Altruist Vanguard announcement, which is probably the biggest one I can think of this year being 2026. Give me your thoughts on Altruist Vanguard. What does it mean for Schwab and Fidelity and the RIA space as a whole? Steve Chubak: Yeah, it’s a really interesting transaction. Candidly, it wasn’t one that was on my bingo card for this year. And I should start off by saying I have a tremendous amount of respect for the Altruist team and what Jason has built. The fact of the matter is this has been a really dominant oligopoly for an extended period of time within the RIA space. They’re one of the few names that were really able to break in, but they’ve been able to have success with that smaller RIA cohort. And I believe there are about 6,000 some odd advisor teams that are on the platform. I haven’t seen explicit AUC numbers, but I believe that the average size is about anywhere from 100 million plus or minus. That would imply about 50 to 75 billion of aggregate AUC on the Altruist platform. And for context, that equates to about 1% of AUC at Schwab. I’d also point out that Schwab has actually recruited more in AUC in each of the last two quarters than the aggregate size of Altruist, just to offer some perspective here. So while I do think Altruist is going to have some success moving up market, they benefit from being able to leverage deep pockets. They certainly are known for being a very tech-forward firm, so I do think they’re going to have success. At the same time, I think they’re going to have success with some of those smaller RIAs still, and Schwab is going to continue to have a fairly dominant position amongst some of the larger RIA teams. Jason Diamond: Is that because Schwab, and let’s call it Fidelity as 1A or 1B, is that because they’ve just become kind of the default options or is there something you feel that they just do better than everybody else? Steve Chubak: I think the breadth of the offering is something that’s really unmatched, and actually, we just had the opportunity to meet with Schwab management. I thought Rick actually articulated that really well. I think he’s also keenly aware of some of the products that are in very strong demand and doing what’s needed to try and offer that in a responsible way. And probably the best example here would be the RIA long short offering, which AQR popularized, which is the demand is incredibly strong. We’ve seen a number of firms that have slowed the pace of growth of late, and that’s simply to manage around some operational difficulties like sourcing some of the borrow. I don’t want to get too in the weeds here, but that’s an example of the type of product where there’s strong RIA demand and Schwab found a way to offer it, and they’re still focused on still being responsible about growing said product, but at the same time, still having that as a driver of accelerating RIA flows. And that’s one of the reasons why even since the Altruist Vanguard deal was announced, what we’re seeing and hearing suggests that RIA flows, at least on the Schwab platform, have remained incredibly robust and resilient throughout. Jason Diamond: So let me ask you this question. I’m going to put you on the spot here. It sounds, based on your comments, there’s some firms, particularly the bigger firms, that you are bullish on. Do you agree with this statement that in 10 years, let’s say, whatever the timeframe is, the wealth management world is dominated by Morgan in the W2 space, Schwab in the independent space, and maybe LPL in the broker dealer space. Is that the world we’re heading towards? Steve Chubak: Yeah, I do think that those three names across those individual channels are going to be consolidators of share. I just think Morgan Stanley, in particular, it’s certainly viewed as the strongest platform within the wirehouse channel amongst many of the investors we engage with. I think they were certainly the most innovative when it came to deploying AI, and every time I engage with Jed about some of their efforts on the technology side, they are clearly pioneers in many different areas. I think Workplace in particular is probably the channel that I’m most bullish on in terms of value prop, growth prospects, but also the cost of asset and acquisition being so much lower within that channel. And so, I feel like they built a really strong ecosystem there. LPL, similarly, I think has just been very innovative in their approach within the IBD channel, whether it’s liquidity and succession, whether it’s their strategic wealth services offering, which serves as somewhat of a hybrid offering to attract some of those wirehouse advisors, and they’ve done a really nice job there. Then, from Schwab’s perspective, they are the behemoth in the RIA space, but I think because of the breadth of the offering, because of the investments they’re making on the technology side, as well as on the product side, that’s going to enable them to have a really dominant position. I think the beauty of Schwab’s competitive position is that even if they’re growing in line with the rest of the RIA industry, that’s still going to support high single-digit to low double-digit AUC growth year to year, just given the structural tailwinds in terms of migration from W-2 to independent, no one knows this better than you, Jason, remains firmly intact. Jason Diamond: It’s hard to poke holes in anything you said. It does feel a little bit like the rich get richer. Again, not to put you on the spot, but will you venture some maybe bearish names, or even if you don’t want to give names, any pockets of the industry that are causing you some anxiety or concern right now? Steve Chubak: I’m always more cautious just on… I mean, this is the opportunity, admittedly, for many of the public names that I cover. On a lot of the PE sponsor-backed names, I always just question, given higher levels of leverage that they employ, particularly in a higher for longer interest rate backdrop as we’re bracing for incremental hikes, and then just questions around what the end game is for some of the private equity firms that actually own many of these names. I don’t necessarily feel like they have the same long-term commitment to match some of the others, and therein lies the opportunity for the likes of whether it’s LPL or Ray Jay to potentially recruit from some of those firms. I think one of the really interesting debates that’s happening now, Jason, is there are some firms that have drawn a clear line in the sand. Whether it’s in Ameriprise, I might even throw Stifel into the mix, that have said, “We are not going to compete with some of these aggressive TA packages. We just don’t believe that the returns, the paybacks are sufficiently compelling.” Whereas there are quite a few other firms, whether it’s LPL, Raymond James- Jason Diamond: Ray J. Steve Chubak: … indicated to us that they can still underwrite a lot of these advisor teams to very attractive IRRs, attractive paybacks, and because of that, they’re going to continue to recruit and recruit fairly aggressively. So there’s definitely different stances that some of the individual firms have taken. They’re still all very committed to the space. I think the willingness to at least match some of the more aggressive TA offers that are out there, we’ve definitely seen greater dispersion on that front. Jason Diamond: So who’s right? I have a very clear point of view. I’ll go first. I believe that firms have been making fun of how high TA have been when they were 100% in W-2 land. So to me, it’s like I use the old quip of democracy is the worst form of government besides all others. TA is the worst form of recruiting besides all others. Who is right? Do you believe that the cautious capitals expensive approach is ultimately going to bear fruit long-term or is it better just to write these ever-increasing recruiting deals? Steve Chubak: No, I do think the firms need to employ discipline here, and there is an efficient frontier that can be had. So this is something we actually unpacked recently after we met with LPL management. And to be clear, this is not their view. This is my personal view and my team’s view that I don’t necessarily need to see LPL grow organically 10% and, as a result, see much weaker free cash flow conversion because that’s something that is getting increasingly scrutinized by the investor community. And so, for us, the efficient frontier is still healthy levels of organic growth at, let’s call it, mid to high single-digit, but being able to marry that with strong free cash flow conversion, what we’ve seen historically is if you have a good balance of both of those items, it’s typically translated into better stock performance, better earnings growth over time. And so, I do think that there’s a balance here to be had. It’s not simply try to maximize TA, match the most competitive offers that are out there in the marketplace. You do have to strike a balance where you still want to continue to grow, focus on organic growth, but not necessarily try to maximize organic growth at the risk of weaker free cash flow conversion. Jason Diamond: I heard an interesting quote on this from a unnamed executive at an unnamed big firm who basically said, “If you are the firm that writes the biggest check, you get the advisors that chase the biggest check.” And I think there’s something to that too, is that firms have become a little bit, I don’t know, gun shy is the right word, but a little bit mindful of the fact that the type of advisor who is likely to take a big check or the biggest possible check is also potentially the type of advisor that might move again. And I’m not villainizing taking the check. I believe advisors deserve to be compensated. It’s risky to move, it’s a hassle to move, but I do think we’re seeing, from our perspective, firms are definitely getting more selective. I don’t know if it’s because cash has gotten more expensive, just because there is a lot of scrutiny on this, but firms are definitely getting more selective about how they deploy max TA packages, max transition assistance packages. Do you agree? Steve Chubak: I certainly agree, but now, Jason, it’s my opportunity to put you on the spot since I’m curious as some of these firms have to underwrite TA packages that have a very long duration, and we are entering a period where agentic AI is front and center. And there’s a lot of concern that firms aren’t going to adequately handicap the risk of monetization pressures, whether that’s lower fee rates on advisory fees over time. I’m not speaking over the next year or two, but given the long duration of some of these TA agreements, how are companies at least handicapping that risk? Jason Diamond: I think it’s a very real risk for deals that were put on the books before firms had any of this on their radar in particular. That’s what I worry about. I think now, firms have a pretty good sense that this is coming, some of these cash dynamics you’re talking about, potentially even some of these AI risks where their advisors are just going to be slightly less profitable. But I do worry a little bit about firms that wrote 11 to 13-year deals four years ago. I will say this, the bull market has solved for a lot of this headache because advisors who grow just make these deals attractive. That’s what we’ve seen is that even these deals that seemed expensive at the time, we’ve seen astronomical growth from some advisors, X market even at a lot of these firms, and then those deals look good in hindsight. I absolutely worry that if we see a prolonged or a sustained kind of neutral to down market, I think these firms wrote deals to high enough IRR numbers that I’m not like, “Oh my God, I’m crying poor.” But I could see a world where firms have to take a write-down on some of their recruits like they’re just not as profitable as they originally envisioned. What are your thoughts? Steve Chubak: Yeah, I think that’s right. We’ve done the IRR math ourselves. I think what we’ve seen, I alluded to some of these numbers earlier, payback periods have probably been extended by about a year. The IRRs have contracted by about 500 basis points, but there are names that could still underwrite to IRRs that are in the upper teens to 20% type range. And I should also note that analysis, since I want to be completely transparent, I had a bunch of clients who complained about it because we evaluated it on a timeline of seven years, but there are advisors who are going to stay on the platform beyond the TA agreement. And if anything, that maybe understates at least some of the returns that can be underwritten by these firms over time. Jason Diamond: Absolutely agree. And I think, look, I don’t worry, at least this is my personal view, I don’t so much worry about the fee compression risk of the agentic just because I think firms have gotten really good at avoiding it. I do worry a little bit about are advisors going to have to start offering a lot more? Are you going to need bigger teams? Just things that, in general, impact firm profitability. But I have a hard time believing. I’d be curious to hear your thoughts. Do you think there’s a world where advisors who are now charging 1% to clients are all of a sudden going to have to start charging 30 bps because of AI? Steve Chubak: I think there’s going to be some marginal pricing pressure, particularly in areas like brokerage. The beauty is that we’ve already been seeing over the last 5 to 10 years a migration to advisory where the pricing and fee rates are much more resilient. And it’s one of the reasons why if you look at asset management fee rates, since the emergence of passive ETFs, they’ve only moved in one direction and that’s steadily lower. Whereas on the wealth side, while brokerage fee rates have come down, what we’ve actually seen on the advisory side is far greater resiliency over time. So that does instill some greater confidence, at least on our part, that the pricing is going to be more resilient. I’d also point out that a lot of the products that are in much stronger demand, someone who covers the alts, certainly the growth in retail alternatives, the proliferation of retail alts, despite some of the recent agita and concerns around the BDC space, the reality is private equity, secondaries, infra funds, they’re in very strong demand. They do generate uncorrelated returns, and especially given how active a lot of these firms will be, and this is where we’re spending a lot of time now in fact, Jason, on the AI data center financing opportunity that as more money is allocated by the retail community to alternatives, that’s also accretive for pricing and for earnings for a lot of the firms as well. So there’s a lot of different trends that we’re seeing in terms of product demand, where companies are pivoting to. And I think Schwab is the best example here where their revenue as a percentage of client assets, which to me is really the litmus test or barometer for how much value you’re providing to the end client, they stack up as best in class on that front. But it also speaks to the fact that they probably have more room to adjust pricing, and they’ve done that in select areas. They’ve raised the SAN threshold, for example, and they’ve taken those actions to at least protect and preserve some of their pricing power, which frankly, I think they’ve earned just given the sheer amount of value they offer based on this metric. Jason Diamond: The other concern we hear, and maybe you don’t model out this far, the other concern we hear is, I agree. My parents are 60 years old, and my advisor can keep charging my parents 1%, but eventually, the kids are going to take over the money and they’re going to have a very different experience with the advisor, with the money, with the fee relationship. Do you give any thought to that, that there’s this great wealth transfer that could be 20 years from… I mean, you have to put some weight to that if you’re modeling out discounted cash flow stock prices, right? Steve Chubak: No, I think that’s certainly fair. Now, at the same time, there are some historical paradigms that do give me some comfort here. So the best example would be the emergence of robo-advisors. And I remember back in 2013 where everyone expected that 20% of millennial assets were going to be managed in some sort of robo offering, and that number today I believe is about 1%- Jason Diamond: Really? Steve Chubak: … of what source you use of the aggregate retail TAM over a decade later. So I think what we’ve learned over time is that people do value advice, human intervention. I know there’s a lot of advisors in the audience. We’re not just at least trying to appease them. I think there’s clear evidence based on some of the historical trends that people want human advice. They want at least some human participation to help even from a handholding perspective. And I will tell you as someone who tried to leverage at least an LLM recently to forego having to pay a lawyer, I got about 75 to 80% of the way there. And that last 20%, I was incredibly uncomfortable and made the determination that DIY might not be the right approach for that sort of thing. And I feel, frankly, similarly on advice that there’s a lot of tax optimization and complexity. There’s a lot of complexity around trusts where people don’t necessarily want to delegate that simply to an agentic tool. Jason Diamond: So you just nailed it, and I love the lawyer analogy because I think it’s high-level professional services, and I think this is more true, the larger your client base is in terms of average clients like more sophisticated clients. I just feel we have this moat and this kind of immunity to a lot of this, and somebody’s going to play this back in 10 years and laugh at me in the face, but to me, it feels like an area. It’s not like my Fios box broke, and I’m okay. I’m comfortable with an AI agent there. It feels like an area that is insulated because to your point, that last 20% is what matters the most and it’s what people seem to value. It gives me comfort too, I will say. We’ve got time for a few more. You mentioned KPIs, key performance indicators. When you look at a company, let’s say I give you two minutes with the company’s financials, what do you look at? What does your mind immediately go to? Is there a certain metric or metrics that you think are the most telling these days? Steve Chubak: Sure. Organic growth first and foremost. As much as I wish that if any of the companies are listening, that they would break out same store versus new store growth, frankly, there’s just been less disclosure around that given some of the heightened competition, but even organic growth at the headline level is certainly something that we focus on. Operating leverage, so as revenues continue to scale, it’s nice that we’re in a bull market. It’s nice that there are significant interest rate tailwinds that are benefiting these firms, but how are they striking that balance between investing for growth and allowing some of that windfall to hit the bottom line? We usually like to see a better balance there. If a company’s compounding revenues at 15% and growing expenses at 2% and the rest of the competition is growing at 5 to 8% in terms of cost growth, that’s something that does not sit well with us because that is a temporary boost to earnings that certainly isn’t going to be durable or sustainable. Jason Diamond: Let me ask you two more questions. I think you and I first started speaking about cash sweeps. It’s probably 18 months ago, which is certainly long before it was on the radar of a lot of advisors and clients. Do you have something else that’s in the back of your mind as this is the next big thing that people aren’t talking enough about? Steve Chubak: I do think this is certainly the next shoe to drop, just given even what’s taking place today with the reaction to the number or the quantum of Meta Muse downloads and what the implications are for financial services broadly. The wealth names are selling off a bit more than some others. You actually saw some insurance brokers sell off yesterday. So anyone that is in services industry or in financial services where there’s a perception that there might be some risk to pricing or monetization, there is certainly an acute sensitivity to that amongst investors at the moment. I would say there are a lot of interesting dynamics that we’re looking at certainly ahead of our wealth conference. I would say certainly, to self-clear or to not self-clear as some of these larger firms continue to scale because do you want to have full ownership of the data? Do you want to ensure that you can maintain all of the different monetization streams within your ecosystem rather than at least having some of that go to the Pershings or Broadridges of the world? I think it’s a really interesting debate just given how valuable that data becomes in an AI world and some of the self-clearing entities potentially being able to leverage that. I’ve never really seen a sufficiently compelling value prop where a firm would go down the path of something that’s highly disruptive like converting to self-clearing. We’ve seen only a handful of instances where that’s happened, but I do think AI and, frankly, the importance of data is changing at least some of that calculus for different firms. Jason Diamond: Yeah. And I think maybe some of the Commonwealth LPL reaction too, I’m seeing some of the non-self-clearing reaction there, too. Commonwealth LPL somewhat intentionally because I want to end with, we spoke a little bit about M&A in the light of Vanguard, but I think going into the year, there were some thoughts of there’s some names. You mentioned Stifel. We’ve talked a little bit about UBS, a little bit about Citi. There’s some names that make sense, at least maybe a little bit. Any M&A news that you’re watching either this year or further ahead? Steve Chubak: It’s a little tough, Jason, because I am precluded from putting any companies in play, but I’ll least speak to what’s been put out in the public domain. Look, for a company like Stifel, I know that there was certainly some speculation that Raymond James might be interested. I don’t know. Ron K. seems to be very happy with what he’s doing. In fact, even at our conference last year in JESS, he took a fake phone call from a journalist to say we’re not for sale. Jason Diamond: I remember that. Steve Chubak: It is something where we’ve seen a number of firms like that that are trading at 10 times, and this is an earnings number, not even EBITDA multiple. So 10 times earnings, historically very discounted multiples. Some of that I think is a function of the AI concerns that are percolating in the marketplace, but if anything, there’s never been a better time to at least source attractive targets in the wealth space, at least in the public domain, given the multiples that the group is trading at today. I think that’s one of the bigger surprises too, Jason, since you mentioned a couple of other things we’re thinking about that come to mind. One, I mentioned Workplace, and there aren’t a lot of obvious corporate stock plan targets, but I do think there are quite a few firms that we’ve spoken with who want to be larger in the retirement space. And so, I do think that’s an area where you might see firms look to expand inorganically over time. That certainly wouldn’t surprise me given it’s still highly fragmented, and there are a lot of scale players in the wealth space that are still too small within retirement specifically. So that’s certainly something that we are monitoring quite closely. The last thing I’d say about just wealth M&A in general, at least amongst strategics versus, say, some of the PE or sponsor-backed purchasers, you have to buy it twice, right? Jason Diamond: Twice. Steve Chubak: That’s always the hesitancy or reluctance on the part of some of the public names in acquiring a strategic or public competitor is the fact that you’re buying the property, and then you also have to retain all the advisors. And when you actually layer all of that into the deal consideration, some of these deals start to get much too expensive. But we still see quite a few acquisitions, at least amongst the privates. I think the biggest surprise to me is that we haven’t seen more convergence yet between private and public multiple in the wealth space. Jason Diamond: Yeah, we’ve seen a couple take privates. Yeah, I don’t disagree with you. I just thought of another one that I want to end on. This is a quick bonus round question. Steve Chubak: Of course. Jason Diamond: What is the number one inbound topic you get? Is it AI? It is for us these days. I’m just curious. Steve Chubak: It is primarily AI. I think it’s really about all of the game theory, candidly, Jason, that we had walked through where whether it’s LPL has been speculated as potentially being a first mover on making changes to cash monetization, the reality is that certainly, someone else could be that brave soul that ends up being the first mover here instead of LPL, but trying to think through the game theory in terms of how do other firms respond? Does this drive broader sweeping changes in terms of pricing? Is it isolated just to the IBD channel, or does it extend to the wires and the pure RIAs as well? There’s a lot of really interesting debate that’s taking place on that front. It’s all AI or AI adjacent. I would just say that it’s definitely cash, but it’s also the game theory and the knock-on effects for others that’s getting quite a bit of focus too that people are trying to navigate here. Jason Diamond: Yeah, that’s exactly what I was going to say, the knock-on effects because it’s, okay, fine, we have this giant topic of AI, but then gaming out how it’s going to impact cash sweeps and monetization and advisor fees and advisor productivity and advisor movement, that’s where the fun begins. So we’ll have to invite you back. This is a topic that’s evolving very rapidly. So I know next year, we’ll probably have an entirely new slate of topics to talk about, but this has been a ton of fun and a really interesting different perspective from a largely institutional seat. So thank you for sharing your wisdom and expertise with us, Steve. It was a pleasure. Steve Chubak: You’ve been a tremendous partner of ours too, so thanks so much for having me on and always enjoy engaging on this topic. Goes without saying. Jason Diamond: Thank you. Mindy Diamond: As a financial advisor, you hold yourself to the highest standards of integrity, honesty, and credibility. You are successful because you take your professional responsibility seriously and are dedicated to your clients. But are you living your best business life? Are your goals aligned with your firms or could a better option exist? Should I Stay or Should I Go? is a book written with you in mind. It’s a self-guided journey that walks you through the key steps that we take with our advisor clients. This strategic thought process and roadmap to professional self-discovery is designed to help you ask the right questions and think critically and objectively, whether you’re considering change or not. Learn how to get your copy at diamond-consultants.com/thebook.

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