John Thiel on Indivisible Partners’ Growth Plan
When John W. Thiel, the former head of Merrill Lynch Wealth Management, launched his own registered investment advisor last year, he did so in a very humble and measured way. Now, Indivisible Partners has moved from its initial launch to a much more substantial recruiting operation.
Today, the RIA has a little over $5 billion in assets and nine teams on the platform. And Thiel is more ready to show the industry what’s he’s building inside of the business. The momentum of the firm’s growth has given him an interesting window into what advisors increasingly want from the next generation of RIA platforms.
Wealth Management recently spoke to Thiel about whether the model is working, how the firm is using AI, how he plans to create liquidity for shareholders, and lessons learned from his time at Merrill.
The following has been edited for length and clarity.
Wealth Management: You launched Indivisible with a measured growth strategy. Is the model gaining traction faster than you anticipated?
John Thiel: It’s about what we anticipated. The components of it are probably different than we expected. We’re having a lot of success in the already-independent space and are focusing less on breakaway advisors.
There are a lot of reasons for that. Markets have been constructive. Fee-based assets grow with markets, whether you bring in a new client or not. So that feels like life is good. There’s a sense of contentment in those spaces.
Within the independent space, there are just real realities. There’s potentially a succession that has to occur. Maybe they’re growing tired of trying to keep up with technology and cybersecurity, for example, or their compliance has become a bigger and bigger burden as they grow. Fill in the blank. So I think those are all contributing factors. I think people look at our business and say, “It’s pretty straightforward,” and it is.
WM: You have a little bit of a unique model. Is the model working?
JT: For the people that we thought it would resonate with, it is working. We haven’t filed our ADV, but as we sit here today, we’re a little over $5 billion in assets, nine teams on the platform. And if the platform is functioning very, very effectively, we’ll never be done. We’ve said that from the beginning, but we’ve really deployed artificial intelligence in a real, meaningful way, not the kind you hear from the stage in all the conferences, but a real functional approach to not only streamlining productivity for the advisors, which is always our No. 1 goal. But how we run our business data. AI doesn’t work if you don’t organize your data, and AI is very dangerous if your data isn’t protected and housed in a secure data lake and with an enterprise version of whatever artificial intelligence you want to use.
There are a lot of security considerations, a lot of integration considerations that I think people underestimate. We’ve yet to figure out what the agentic impact will be as people continue to build that out. I think it’ll be very productive, but there’ll be some bumps in the road probably if there’s not a human that’s paying attention.
WM: Would you provide an update on the tech stack you’ve built out? And would you dig in a bit more on how you’re using AI?
JT: We’re multi-custodian, and Advyzon is our platform where we coalesce around. The custodian is obviously the record; it’s the source of truth, but Advyzon sits above it to organize all of that and then integrate all the other point solutions like financial planning, estate planning, portfolio analytics, things like that, if it’s not included in your platform to deliver that. CRM and performance reporting are key components of that.
We feel very good about our relationship with Advyzon and a strong relationship with our planning partners, like Libretto and Wealth.com. And then, obviously, they are all integrating artificial intelligence into their offerings.
It’s just because we have a responsibility for the data, for PII (Personally Identifiable Information), for confidentiality; we just feel very strongly that we need to control what we can control, and we can control our client records. So we’ve built a data lake and a data warehouse, and we’re configuring it such that we can provide to those point solutions only the information they need. Think of a financial planning tool. They don’t need a lot of personally identifiable information. They need numbers and client feedback. So why send them everything? I’m not going to send them a tax return when I can send them adjusted gross income and tax due and things like that. So just using it as an enabler and an efficiency enhancer, but also you’re really controlling security to the greatest extent, if that makes sense.
WM: Are you using a specific vendor for that data lake?
JT: Yes, we’re using Snowflake and Supabase.
WM: Anything else about how you’re using AI?
At Merrill Lynch, there’d be a group of people that would say, “Hey, we really need this capability,” and it would be a hundred people, but we had 15,000 advisors. And it was very difficult to build something for a hundred people when 14,900 weren’t going to use it. So the whole thing is utilization and adoption of a particular toolset that every organization struggles with. We’re very open-minded in doing that, but we still want to measure its impact and then do a diagnostic: What is preventing people from using it? Is it that they don’t like it? Is it that they are still busy transitioning their relationships? Have they gotten distracted? What’s the feedback from the firms that have joined our platform? We’re using it for something as simple as that.
Also, one of the great mysteries in our business is, there’s really no effective investment proposal tool anywhere. There wasn’t at my former firm. And one of the reasons is because everybody has a different asset allocation model. Everybody uses different vehicles to implement those asset allocations. We’re actually building our own investment proposal tool, including the ability to ingest all manners of data in all forms, whether it comes on a statement, whether it comes on a yellow legal pad, whether it’s a tax return, whether it’s an estate plan. It’s taking something that would take two days on an Excel spreadsheet to 20 minutes. Our teams could meet with a prospect today and by tomorrow morning be ready with an investment proposal.
WM: Do you plan to sell that tool to advisors outside of Indivisible?
JT: Right now, we’re just going to keep it internal. There are probably things that would make sense to commercialize, but that just takes us all off our focus of growing the platform and growing the firms on the platform. Because we don’t believe we need and want private equity, we don’t have unlimited resources, so we have to stage this development. And our No. 1 investment is in the advisors, the advisor firms and the capabilities to make them productive.
WM: Aside from the technology, what else have you been working on over the last year or so?
JT: Growth, helping advisors grow. We’re very much focused on helping them market their business plan. First of all, helping them make sure they have a business plan, and then making sure that whatever marketing they’re doing is aligned with that business plan, with an outcome in mind. Our chief revenue officer, Pat Corry, has a bimonthly, twice-a-month routine with each firm, really focused on helping them think about how they go to market with their particular brand, their particular offering and their particular client segment focus.
WM: Indivisible has been recruiting a lot lately, especially with the billion-dollar teams. What is resonating with those advisors?
JT: It’s a package deal. It’s a combination of one, they own 100% of their own business, and we’re pretty staunch about that. Listen, if somebody wanted to sell a portion of their business, we have plenty of capital providers to introduce them to. The way we think about it is that selling your part of your business means you’re selling your growth, and your growth is your greatest multiple expansion strategy.
Fast-growing RIAs sell at higher multiples than ones who aren’t growing as quickly. And so to sell it today, you’re selling it at a discount to your growth rate and to everything else. We like people to own that, and some can’t. But again, if I buy them, I think it changes the relationship that we have. I’m their partner right now. I’m cheering for them. I’m supporting them. I’m helping them grow. I’m investing my time and our expertise and our resources in them. If I own 30% of their company and I see something that I don’t like, am I going to say something?
This allows me to be objective and be a resource without leaning over their shoulder and being tempted to tell them what to do. I’ve managed a lot of advisors over my life, and they don’t want to be told what to do, including me when I was a financial advisor. I want to learn, and I want to benefit from yours, but more importantly, my peers’ point of view. That’s another thing that we spend a lot of time on: making sure that we create opportunities for them to share on a peer-to-peer basis, as well as any resource we can put in front of them that they would like to hear from to support their business growth.
WM: You’ve said that you aren’t building the firm to sell it; you’re not interested in private equity, but how do you envision creating liquidity and realizing value for shareholders over time?
JT: We’re going to make cash distributions, so we will distribute our profits. Having been retired for seven years, I have a nice balance sheet, but balance sheets don’t always equate to cash flow. And you need cash flow, it turns out, to buy groceries and go on trips and enjoy life. And so instead of waiting for some event 10 years from now, 15 years from now, eight years from now, with the idea that you have a crystal ball to know what the environment’s going to be like 10 years from now. Whereas this is unique in the sense that as soon as we’re cash flow positive, they’re going to start receiving distributions on their equity, all the shareholders.
We have a small set of outside shareholders who are all friends and family, and then obviously the founders and the employees. Everybody will enjoy those distributions at the same time.
We think that’s a unique model. It just harkens back to the old partnership models that worked really well.
WM: We just saw an $18.6 billion JPMorgan team go independent and start their own RIA. What are your thoughts on these major teams leaving the wirehouse/bank channel and going independent? What are the implications of that for the wealth management industry?
JT: Depending on where they sit today, whether it be in a warehouse or a bank model, they’re going to be limited as to what they can do for their clients. Is it far-fetched to think that somebody in our business who’s managing their investments and helping them with all manners of their balance sheet, when it comes time to talk about income taxes, has to say, “I can’t help you with that?” That is an unnatural answer. I understand why, from a regulatory standpoint, it lines up, but if you’re a client uninitiated in the risks and the regulatory environment, it probably doesn’t make a ton of sense to you. Well, I can’t tell you that. But in the independent space, obviously, with the right framework and supervision and disclosure, you can do that for clients.
All of a sudden, that becomes integrated, and it isn’t an end-of-year or next-year event for income tax. It is a constant planning discussion on almost every investment decision you make because you can integrate that impact into the client experience and the client decision-making process.
Think about how many people are chasing the long-short strategy, and the custodians are mostly shut down. Why are they doing that? Because they have ossified portfolios. They have portfolios that are chock-full of capital gains, and any rebalancing they want to do comes with a pretty big cost. So that’s a great example of an integration of an income tax impact with an investment decision.
WM: One trend we’re seeing is that the breakaway trend is coming full circle in a way, where some of the big aggregators that are backed by private equity are now very focused on consolidation, integration and profitability, and some say that that can come at the expense of advisors’ freedom. What are your thoughts on that?
JT: It makes me giggle because in 2005, at that point, I was running the private banking investment groups, our ultra-high-net-worth business, and people had said, “You need to think about also having an independent model alongside your employee model.” So we brought in, at the time, Moss Adams, the leading RIA consultant, to talk about it. And one of my colleagues and I were sitting there, and it just struck me. They always say that you end up—whether it’s you, your mom, or me, my dad—you end up sounding and acting like your parents as you grow up. You’re going to find yourself saying the same things they said to you when you were a kid, and your behaviors are going to mimic them, and that’s a reality if you look and if you’re honest with yourself.
I turned to my friend and said, “It looks to me like what they say about your mom and your dad is these are going to grow up and end up looking just like the wirehouses because the only way you can get to a scaled outcome and the kinds of return on equity that these folks are looking for is to limit the size of the offering and the variability of the offering to get the economies of scale from the platform. And they’re going to limit choice, and they’re going to have to deal with the lowest common denominator.” And those are all the reasons why people leave the wirehouses. So I think those firms will face that same challenge.
WM: Another trend we’re following is the developments going on in the custody space. Any thoughts on what’s going on in the custody space? Are you considering any new custody relationships?
JT: We currently custody with Fidelity and Schwab, and we’re happy with them. What’s really important and no one talks about is having the right custodian for the complexity of the client. And if I can’t serve a client because the custodian doesn’t understand it or is unwilling to engage with me on that, then that hurts me; that hurts my business. And so we would always evaluate if we got to a point where we couldn’t accommodate ultra-high-net-worth clients, for example. It’s not a slight on our other custodians at all. We value them and love them, but if that’s not in their model, then no one should be offended by it because it’s not what they do.
WM: What is Indivisible doing in the way of private investments?
JT: It’s something we think we’re quite accomplished at doing. We don’t need to build private equity. We have plenty of capable partners in the AI space. We have a relationship with iCapital and some other folks that we feel very good about.
The firms that are joining us are coming with private markets positions, so job one is to incorporate that into the custodian to the extent we can, or more importantly, into the reporting and the performance reporting. We’ve spent a great deal of time, and this is where our artificial intelligence is also helping us in making sure that we can actually do time-weighted and dollar-weighted performance on private equity positions, because that’s not possible without paying a lot of money. And so we want to leverage artificial intelligence to take some of the friction out of that. That’s an area we’re working on heavily from an innovation perspective.
WM: Would you ever consider taking outside capital?
JT: Theoretically, with our shareholders who are friends and family, that’s technically outside capital. We don’t want to dilute anybody, so that would be important, but the capital we would take would probably express itself in debt, not equity. Because I can pay back debt.
WM: Are there any lessons learned at Merrill that you’re using to lead Indivisible?
JT: The discipline of running a very large business with a lot of counterparties has come in very handy; we have that muscle memory. We know how to evaluate, and we know how to dig into the risks. Obviously, when we build the tech stack and improve the tech stack, it’s always with the mind for it to enhance the efficiency of the teams, but also be able to be utilized at scale. The future is unlimited in that regard as far as usage. Behaviorally, the challenges that advisors face every day in the business and with their clients, I have a high degree of empathy. It’s refreshing to understand why people make the decisions they do and do the things they do because I live it every day, and I was an advisor. And I’m a client, so I’m on the other side of it, which also is a wonderful perspective that sometimes our industry loses track of.
