How do you pool the assets of many advisory firms for mutual benefit? Here’s a case study.
The concept behind an association is to pool assets and buy services that most individual advisory firms would never be able to afford on their own. For example, the FPA chapters can pool member resources to rent facilities and bring in outside speakers for CE credits and ongoing education every month. Theoretically, the home office will pool membership dues, and provide a similar panoply of member benefits purchased on behalf of advisors—an issue that lies at the heart of the Financial Planning Association’s recent controversy over dissolving the chapters and appropriating all chapter assets into a single FPA account. The question that has been raised, broadly, is: what value does an association provide with the scale of tens of thousands of dues-paying members that the members would not be able to afford on their own?
Go to the FPA discussion boards (itself a member benefit) and you’ll find a variety of answers to this question. But it becomes interesting in light of a new organization which directly addresses this scale-and-value proposition: collecting dues to buy a variety of discounts and services which exceed in value the dues being paid by multiple orders of magnitude.
Chalice Financial Network (https://www.chalicefn.com/), co-founded by former LPL Financial managing director Derek Bruton along with 33-year industry veteran Keith Gregg, is described as a “digital marketplace” for independent financial advisors. You pay $99.99 a month, which gives you access to a variety of business and legal documents via a strategic partnership with a national law firm. There’s a discounted price for compliance services provided by National Regulatory Services.
Is that it? Not quite. “We’ve negotiated 25-30 percent discounts on group health and disability insurance, with dental and vision and all that, through a professional employer organization (PEO) called Oasis,” says Bruton. “I believe they now have over 300,000 members. They were just acquired by Paychex.”
Anything else? “We’ve set up an arrangement with a firm called ProSites,” says Bruton, “for them to design very customized, comprehensive websites for advisors. The interesting thing about them is that the advisor websites are set up to optimize searches and for lead generation.” Chalice negotiated an attractive setup fee—free—although there is an ongoing monthly fee for hosting and lead generation. “Website setup represents roughly $6,500 worth of value right there, for becoming a member,” says Bruton.
Then there’s SuccessionLink. Chalice acquired SuccessionLink last October; it now has 43,000 advisory firms listed either as potential buyers, sellers or merger partners. “Chalice members receive the premier membership,” says Bruton, “which allows them to see more data about a seller or an advisory firm that wants to acquire.” The normal fee: $850.
“You think about one of the biggest trends in the industry right now, succession planning, M&A and acquiring scale are right up there,” Bruton explains. “We now have the biggest marketplace of these buyers and sellers. And we’ve built in a tool that will accurately value a practice.”
To complete the M&A value proposition, Chalice has negotiated an arrangement with Oak Street Lending, to provide non-SBA lending with no application fee, to provide the capital for advisory firms to acquire other businesses or fund their internal successions.
Is that all the benefits? “We’ve negotiated group discount partnerships with Quickbooks for accounting, and arrangements with WeWorks and Jones Lang LaSalle for short-term or longer-term office space around the country,” says Bruton. “And we’ve negotiated discounts with Office Depot of up to 50% on office supplies and hardware.”
Does Chalice offer any technology discounts or services? For advisors who want an integrated tech stack, with the convenience of single sign-on, Chalice has hired developers to build tight integrations between the Redtail CRM and Orion Advisor Services for performance reporting. The integration also includes eMoney Advisor for financial planning and Riskalyze for risk tolerance assessment.
All of these programs are offered, together or individually, at a steep discount to the rack rate, and Bruton says that the biggest single expense his new firm has encountered so far was developing a Chalice technology overlay on this popular suite. “You sign on, and Orion, Riskalyze, Redtail and eMoney show up on the dashboard,” he explains. “We know the top ten things that advisors look at on Redtail every day, so we put that as a snapshot right on the desktop, and it’s basically the same with the Orion snapshot and so forth.
And how much are those discounts? “Minimum of 15% up to 50% with just about every strategic partner we have,” says Bruton. “We’re able to get these discounts because we’re bringing all of these members to our strategic partners, lowering their cost of acquisition.” Based on feedback from existing Chalice members, Bruton and chief innovation officer Christopher Giles are exploring other potential additions to the integrated software suite.
The discounts are opening up a new market for the more expensive software solutions. “Most small to mid-sized advisory firms can’t afford Orion or eMoney Advisor,” says Bruton. “They don’t have the scale to buy top-of-the-line software for their client service package, so we’re bringing down the cost to something more in their price range.” The firm’s website estimates that the average Chalice member saves $25,000 a year through the various discounts.
So far, Bruton says, the health and disability insurance option has been the biggest membership attraction. “People are saving $8,000-$9,000 a year on that alone,” he says. “The free website setup and design has been very popular as well.”
Currently, Chalice has 44,000 members, who come from every direction—dually-registered, fee-only and quite a few breakaway brokers looking for a comprehensive replacement to what they’re leaving behind. Bruton says that small broker-dealers who don’t have the scale to offer the discounts and practice management enhancements have been encouraging their affiliated offices to sign up with Chalice. “We think we’re going to allow those smaller firms to be more competitive, because they don’t have the capital themselves to build these things,” he says.
For a barely two-year-old organization, Chalice’s growth—now exceeding the combined FPA and NAPFA membership by a wide margin—is impressive. But more importantly, Chalice is an example for other organizations that are pooling advisor money through dues or membership fees as to what can be accomplished with those pooled reservoirs of capital.
If you’re paying rack rate price for anything you’ve read about here, or are thinking about upgrading your health insurance and website, you might consider a Chalice membership and save yourself some money.