Can’t we all just get along?

Dynasty Financial Partners announced a minority stake in a massive new RIA with $129 billion in client assets that recently broke away from Merrill Lynch. It’s one of the largest deals in recent memory and will add some 160 financial advisors to the Dynasty platform, according to a Form ADV. It’s the latest example of the breakaway movement that has lured thousands of advisors and advisory teams away from wirehouses and into the independent channel.

The blockbuster move has also prompted Merrill to file a federal lawsuit in US District Court in Atlanta against Dynasty, custodian Charles Schwab, and the former advisors, alleging that there was a “pre-meditated corporate raid” to launch the new RIA called OpenArc Corporate Advisory. The lawsuit claims the advisors used Merrill’s offices to plan their exit, recruited junior staff and helped the group raise $90 million to fund the move.

Raiders of the Lost Assets

Merrill also alleges that the departing advisors, who were from Merrill’s Global Corporate and Institutional Advisory Services group, violated the Broker Protocol, a set of agreements created in 2004 that aimed to establish rules for how advisors could move between competing firms. “Through the spread of misinformation and strong-arm tactics, the defendants already have conspired to poach Merrill’s GCIAS business, including 170 financial advisors and support staff,” the suit states. A Merrill spokesperson declined to comment.

However, Jeff Crowell, a former Merrill Partner and OpenArc’s managing partner, said in a Wednesday statement that the breakaway reflects demand for alternatives to traditional brokerage models. “Dynasty takes the protocol for broker recruitment very seriously,” a Dynasty spokesperson said via email. “Fear will not dictate the actions of the most independent-minded advisors who seek the best outcome for their clients, teams and their families.”

Got to Break Free. Merrill’s Global Corporate and Institutional Advisory Services group provides equity compensation and retirement plan services to corporations and wealthy clients. Because of this, much of the $129 billion in question is institutional and in 401(k)s. OpenArc plans to blend corporate benefits, executive services and private wealth management, according to a statement.

However the legal wranglings play out, the move may be the biggest example yet of the breakaway trend, as hundreds of advisors continue to leave the wirehouse world for the independence of RIAs. Cerulli estimated that by 2027, RIAs will manage 31% of all wealth management assets, while wirehouses are set to hold 27%.

Don’t trust before you verify.

While advisors feel good any time a prospective client walks through the door, a small fraction of potential customers may have earned their money illegitimately. Some may be trying to launder proceeds from criminal enterprises such as drug-trafficking and racketeering, and the Bank Secrecy Act requires many wealth managers to set up procedures to detect such transactions and, potentially, to alert law enforcement.

Bad actors “are definitely finding better ways to navigate through the system, certainly with the explosion of digital currency,” said Jon Glass, partner of financial crimes advisory at consultancy SolomonEdwards. Even with traditional assets, institutions are often just barely ahead of the curve in spotting questionable activity.

Red Flags

Altogether, the roughly 5,000 US financial institutions file about 4.5 million suspicious activity reports annually, Glass said. One emerging scheme involves Chinese money laundering networks collaborating with Mexican drug cartels, according to the Financial Crimes Enforcement Network, a division of the US Treasury Department. FinCEN analyzed more than 135,000 Bank Secrecy Act reports in the four years through 2024, tying $312 billion in suspicious transactions to such networks.

Advisors should scrutinize the origins of client funds to ensure compliance with financial regulations, experts say. Money flowing from areas like Cyprus, Seychelles, the Bahamas or the Cook Islands is a red flag. “They’re considered high-risk bank secrecy havens,” Glass noted. “US sources can launder money too, but those locales carry greater risk.”

FinCEN urges firms to watch for:

• Small US businesses in electronics or real estate receiving unexplained wires from Mexico, China, Hong Kong or the UAE.
• Clients whose income does not match their occupation.
• Customers who use credit cards to purchase large amounts of electronics or luxury goods.

Call the Vet

While claims of financial corruption involving clients of large institutions make headlines, smaller advisors may be even more vulnerable since they lack the infrastructure to monitor transactions effectively, according to Glass. “The smaller firms also don’t get as much scrutiny, and money launderers know that,” he said.

That’s why vetting is critical, especially when a prospective client seems eager and flush with cash. Wes Battle, a Maryland-based independent advisor, warned against letting excitement cloud judgment. “It’s a hungry advisor’s dream, so they try to fast-track things to get the business and haven’t really vetted the client,” he told Advisor Upside.

Psst, what’d you get for question 3?

Nearly two dozen large language models including Gemini, GPT and Llama took a mock CFA Level III exam, often viewed as one of the hardest tests an advisor can take. Scarily, a handful of them actually did very well, according to a study conducted by the New York University Stern School of Business and AI wealth platform Goodfin. In previous studies, the LLMs fared well on the multiple choice questions, but struggled on those pesky essay sections (we hear you). This time around, though, a few chatbots excelled at both.

While that all may sound a little disconcerting, researchers underscored the critical need for continued human oversight in financial decision-making. “We emphasize that current LLMs should be viewed as assistive tools rather than autonomous decisionmakers for financial applications,” they said in the report.

Cram Session

The level III CFA exam often requires hundreds of hours of prep time over the course of months. The exam in February had a 49% pass rate, meaning half the people who took it would have to take it again to get certified. The researchers estimated a passing grade for the exam is 63%. In some cases, AI almost made it look too easy:

• Open AI’s o4-mini model received a composite score of 79%.
• Google’s Gemini 2.5 Flash model scored a grade of 77%.
• Anthropic’s Claude Opus 4 received a 75% grade.

While AIs’ strategic thinking is improving, the tools performed best when the questions were simpler and more straightforward. The tests were graded by both AI and humans, and when it came to the essay questions, humans were actually more lenient, awarding an average of 5.6 points more than the LLM-graders.

Test Time. If you’re still a little worried about AI replacing advisor jobs, this might pick up your spirits. EncorEstate Plans recently tested 46 LLMs on estate-planning questions, and the results were not great. Some platforms failed more than half the time, while others could answer only simple questions. “Clients often turn to AI for quick estate planning advice, but our study shows technology can’t replace the nuanced expertise of human professionals,” Matt Morris, CEO of EncorEstate Plans, said in a statement.

So rest easy knowing AI just can’t match the level of bespoke financial planning and critical thinking offered by humans … yet.