A New York-based Osaic-affiliated team is the latest to move from the firm’s 1099 to W-2 channel.
Gateway Investments is joining Osaic’s W-2 channel, which Osaic calls “Empowered Independence,” after affiliating with the firm under its 1099 channel since 2004. The firm has $1.5 billion in assets under advisement.
Before Osaic rebranded and integrated its eight affiliated broker/dealers under one name and structure during the “Journey to One” initiative, Gateway was affiliated with Royal Alliance.
Managing Director Thomas Santucci leads the firm and said moving into a W-2 channel would open up more time for clients while relegating operational support to Osaic.
“Transitioning to Osaic’s Empowered Independence model allows us to focus more of our time on those relationships while also investing in the future of our firm and the next generation of advisors,” Santucci said. “It’s a natural evolution of a partnership we’ve built over more than two decades.”
Cindy Hamel, head of Empowered Independence, expects the number of external teams joining the W-2 channel to grow, with the team aiming to be “much more aggressive externally” in pursuing prospects by the end of the year.
Osaic launched its W-2 employee affiliation model in 2023, enabling the firm to purchase books of business and have advisors join its corporate RIA as employees. Since last year, the pace of teams moving into the channel has accelerated, with 10 deals since Hamel took over its leadership last summer.
In an interview with Wealth Management, Hamel said most teams warmed to the W-2 model for two reasons: for the “time leverage” of regaining those hours previously spent on operational needs, and for team leaders with a three- to five-year time horizon in mind to exit the business.
Joining the W-2 channel allows them to monetize the business, find successors if they don’t have them (or support those they do), and cause minimal client disruption, Hamel said.
According to Hamel, the channel has “really been reactionary,” and hasn’t done much external marketing, as the firm organizes the division’s infrastructure. While three of the teams since Hamel joined have been internal to Osaic, she said the firm intends to “have a more orchestrated external reach-out plan” toward the end of the year.
“When people are in the external marketplace looking, they’ve already kind of made the decision that they’re looking to do some type of transition,” she said. “In some cases, they haven’t thought about moving W-2.”
Earlier this month, Pointes North Wealth Management, a Salem, N.H.-based practice with about $500 million in managed assets, moved from Osaic’s 1099 channel to the W-2 employee affiliation. Previously, they’d been affiliated with Innovative Financial Group, an Osaic office of supervisory jurisdiction.
Like Gateway, the team said the move would reduce the time spent on administrative needs, while also providing more succession options.
According to Hamel, W-2 employee teams get to keep their branding if they so desire, while continuing “to operate their investment strategies in the way that they want.” At the same time, Osaic assumes the team’s established real estate.
Hamel stressed that the W-2 channel would not come at the expense of the firm’s 1099 business, noting that the W-2 channel was likely to grow faster because it was newer.
But she stressed that the firm’s total W-2 business would eventually “meaningfully contribute to EBITDA,” and that the pace of deals into the channel would “accelerate” from the pace set since Hamel joined the effort.
In an interview with Wealth Management, Dimple Shah, an executive vice president of Strategy & Client Experience with Osaic, said that the lines “between channels are blurring,” with Osaic thinking of itself as a “wealth management platform” rather than as an independent broker/dealer platform.
The “premise” of the W-2 channel (as well as the firm’s fee-only RIA business, bolstered by the acquisition of the $13.5 billion Boston-based firm CW Advisors) underscored this change in thinking. Like Hamel, Shah expected the number of external teams entering its W-2 channel to grow.
“That’s not a market that Osaic has historically competed in, but I think it’s an opportunity for us now with this unified platform. We’ve got ‘Journey to One’ behind us,” she said. “These are the types of strategic growth opportunities we can start going after.”
