It’s been a hell of an October for Dynasty Financial Partners CEO Shirl Penney.

The founder of the St. Petersburg, Florida-based advisor services platform won backing from some of the most prominent names in the industry, including BlackRock, JPMorgan, and Charles Schwab, that valued his firm at a reported $800 million. Minutes later, one of the most powerful hurricanes in recent history barreled down on his community on the barrier island of St. Pete Beach.

“Water was literally coming up to the windows,” he told The Daily Upside. After signing the deal, Penney said he ran outside, pulled the electrical breaker, and killed power to his home. He estimates the storm surge eventually topped 4.5 feet, and lasted for more than eight hours. “I’m sure there’s an interesting metaphor in there somewhere,” he said. 

From growing up in rural Maine, where he was homeless during his teens, to founding a wealth management giant with more than $100 billion in assets on the platform, Penney, 47, is no stranger to adversity. In fact, he says it’s taught him to take on every opportunity. Dynasty, which provides technology, funding and recordkeeping to breakaway advisors, is now ready for its next chapter. “Having the largest custodian in the industry, the largest asset manager in the world, and the largest bank in the world, is a pretty good trio,” Penney said.

Advisor Upside: What is the biggest challenge facing advisors today?

Penney: Technology has the potential to displace a lot of the work advisors do. In middle- and back-office [operations], technology will take over some of the roles that currently are occupied by humans. However, the future is going to be cyborg. It’s the empathy that’s so powerful. Clients look to advisors for meaningful life events: positive ones, like retiring; emotional ones, like deciding to sell a business; or sad ones, like divorce. But it’s about having a person to sit with and talk to who understands the human side. For advisors that are helping high-net-worth clients deal with life events, they won’t be massively disrupted as long as they embrace the changes. 

What are the plans for the new funding?

We’re pushing more aggressively to help partners grow by adding other advisors and clients. As a result, the M&A deals for those clients to buy other practices are also getting much larger. We needed a fortress balance sheet with plenty of capital to support the M&A appetite of some of our larger clients. We’re also starting down the path of building out some AI tools that are going to apply against our data lake to help advisors connect with clients and offer suggestions on how they can run their businesses better. 

What’s one thing no one is talking about?

I’m a big believer in the American Dream. But the financial wellness and health of the country isn’t getting better — it’s getting worse. Some 75% of Americans can’t put their hand on $1,000 in an emergency, meaning they’re one car breakdown or leaky roof away from disaster. You’ve got the national budget deficit and state-level deficits. A lot of state pension funds are running dry.

So there’s a lot of financial health that needs to be improved. Fundamentally, the way you improve that isn’t by selling people products they may or may not need. It’s by giving people sound advice. Over time, that approach might make a dent.

Please, let us take care of that for you.

Advisors are hearing from clients that they personally manage crypto investments on exchanges like Coinbase and Binance, according to experts. In order to get a better understanding of those held-away assets and bring those investments in-house, wealth managers are increasingly diving into the crypto world through ETFs and separately managed accounts. More assets under management is always a plus, and that’s benefitting clients too.

“Clients are seeing that the price of bitcoin and ether has gone up in the past five years and are saying, ‘Hey, I should probably get these assets under my advisor’s discretion, not in this little side investment,’” said Damon Polistina, director of research at Eaglebrook Advisors, a crypto investment platform for wealth managers.

See Spot Run

Issuers like Franklin Templeton, ARK, Grayscale, and others have poured into the space to meet growing client demand for crypto ever since the debut of spot ETFs, which directly invest in cryptocurrencies as the underlying asset:

• Betterment has gotten particularly bullish on spot ETFs, telling clients this month that its existing crypto portfolios are being discontinued and replaced by a new crypto ETF portfolio. 
• Just last week, BlackRock’s iShares Bitcoin Trust ETF (IBIT) attracted over $1 billion in inflows. Investments continued this week even as bitcoin’s price fell. The fund now has more than $26 billion in net assets.
• At the end of its third quarter, Morgan Stanley held $272 million worth of bitcoin ETFs in its portfolio.

“The Bitcoin ETF broadened the potential investors for cryptocurrency and legitimized it,” Polistina said. 

In Crypto We Trust. The transition from crypto exchange to advisory products has been driven by ease and familiarity. It’s simpler to let a world-renowned firm like Fidelity or BlackRock manage crypto assets rather than handling that yourself, Polistina noted. 

However, crypto still has a way to go before it’s considered mainstream among wealth managers. A Cerulli report indicated that roughly 14% of financial advisors are using or discussing cryptocurrency with clients, but only 2.6% are making recommendations.

“The adoption is going in the right direction, but it’s still very early innings,” Polistina said.

Brokers beget brokers. 

The largest broker dealers are getting larger and that’s leaving a lot less room for the little guys, according to new Cerulli data. The 10 largest broker dealers control 58% of all brokerage assets, and more than 90% is now managed by the top 25 firms. That level of consolidation is having significant impacts on the industry, and it’s not expected to slow down any time soon, according to Cerulli’s director of wealth management, Mike Rose. 

“It’s going to be increasingly difficult to operate a very small broker dealer given all of the increasing challenges they face,” he told The Daily Upside. “For those advisors that really want a boutique environment to operate in, they will have increasingly fewer choices.”

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