March 13, 2023
Louis Diamond Quoted
By Ian Wenik
As the reality of Silicon Valley Bank’s (SVB) failure sets in, a clearer picture of the choices the bank’s advisors must make is beginning to form.
One immediate issue is clients’ cash balances. Though SVB Wealth custodies its clients’ securities such as stocks, bonds and mutual funds at third-party custodians like Charles Schwab and Fidelity, their cash balances are a different story. SVB Wealth had a program where it would hold uninvested client cash at its affiliated bank, according to the $15.9bn RIA’s Form ADV filing with the SEC.
There are broader questions as well. The collapse of SVB puts a big question mark over its RIA arm’s future. Even if a large bank comes in and purchases what’s left of SVB, and even if the wealth management business is part of that sale, its advisors and clients could still be up for grabs.
‘Look at any acquisition in the industry. You look at Cetera buying Securian or LPL buying National Planning Corporation. Even if it’s actually a very sound, strategic buyer, advisors still go to market,’ said Louis Diamond, president of advisor recruiting consultancy Diamond Consultants.
Diamond told Citywire that there are three likely destinations for SVB Wealth advisors, regardless of the bank’s buyer: either they plug into an existing RIA platform with common custody relationships, join a competing RIA with similar client bases as an employee, or join a wirehouse.
SVB’s demise could also be a litmus test for freedom of movement in the RIA industry. Serial RIA acquirers have sued ex-advisors who left, accusing them of violating non-compete or non-solicitation clauses in their employment contracts.
