The Barbell Effect — What Industry Consolidation Means for Your Business

THE BARBELL EFFECT: WHY THE MIDDLE IS THE HARDEST PLACE TO BE

In this solo cast, I want to talk about something that's been at the front of my mind lately — a dynamic I've been seeing and discussing at conference after conference this year. It's showing up with intensity in the wealth management space, but make no mistake, it's not exclusive to that world. The accounting industry has already lived through it. The legal profession is navigating its early stages right now. And if you're in any service industry where capital has started flowing in and consolidation has begun, this conversation is for you.

The concept is what I call the barbell effect. At its core, it's this: as an industry matures and larger, well-funded players emerge, it becomes increasingly difficult to compete in the middle. You end up with the large, scaled operators on one end, and the boutique, high-touch specialists on the other. The firms caught between those two extremes often face the worst of both worlds — too much overhead to compete on price with the small players, and not enough muscle to match the offerings, compensation, and marketing firepower of the big ones.

WHY I'M TALKING ABOUT THIS NOW

I recorded this in June after speaking at several major wealth management conferences — the RIA Edge conference in Nashville, the NAPFA conference in Minneapolis, and the FPA NorCal conference. The common thread running through all of them was this question of what's happening to firms in the middle as PE money and large aggregators continue to reshape the landscape.

At each stop, whether I was presenting on alternatives to PE-backed aggregators, employee incentive and retention vehicles, or internal succession strategies, the same underlying tension kept surfacing. Advisors and firm owners are watching a train coming down the track, and they are trying to figure out which platform to stand on.

THE WEALTH MANAGEMENT LANDSCAPE RIGHT NOW

Private equity money has come into the wealth management space heavily over just the last five to seven years. That may sound like a long time, but in the arc of an industry's evolution, it's early. And yet the numbers are already shifting. The 2026 Advisor Growth Strategies Report highlights the dynamics playing out among larger, smaller, and mid-sized firms. DeVoe's latest quarterly report confirms that there are fewer buyers chasing more sellers in the RIA space, and that the average seller has crossed the billion-dollar AUM mark.

When I graduated law school in the mid-1980s, a billion dollars was a huge firm. Now it's considered mid-sized. That's what happens when consolidation takes hold — the definition of "big" keeps moving upward, and what used to be a very large firm becomes the new medium.

THE ACCOUNTING INDUSTRY: A PREVIEW OF WHAT'S COMING

If you want to see where wealth management may be heading, look at what's already happened in accounting. The Big Eight became the Big Four through mergers. Below that tier, firms like Eisner and Amper — each a substantial firm in its own right — combined to compete at the next level. Apria is another example of a firm growing aggressively through acquisition. The pattern is unmistakable.

What you end up with is a hollowed-out middle. The large firms can offer broader services, better compensation packages, and more sophisticated back-office infrastructure. The boutique firms compete on relationships, customization, and the direct involvement of senior talent. But the firms in between — too big to be truly boutique, too small to match the big players — face a genuinely difficult competitive position.

THE SPECIFIC PROBLEM WITH BEING IN THE MIDDLE

I've had this conversation in our Entrepreneurs Organization lawyers group more times than I can count. At one point I made a comment that stuck with people — that it's a lot easier to be a two million dollar and below revenue law firm, or a ten million dollar and above revenue firm, but in the middle it's really tough.

The reasons are structural. Firms in the middle have more overhead to cover, which means they're generally not fee-competitive with smaller operators. But they also lack the scope of services, the capital, and the recruiting power of the large firms. Good people get recruited away. It becomes hard to attract new talent. And if growth is the goal, you often find yourself in that painful crossing-the-chasm phase — where you have to make significant investments in technology, systems, and management ahead of those investments paying off. You have to absorb the dip before you can reach the next level. And if you don't make those investments, you get stuck where you are.

THE LAW FIRM PARALLEL

The legal profession is in an interesting position because of professional ownership restrictions — in most states, you still need to be an attorney to own a law firm. But PE firms have found structures similar to what was used in healthcare, where a non-legal management company handles back office, billing, administration, and marketing, while the attorneys retain ownership of the actual legal practice. It's an architecture that lets outside capital get into the economics of the business without technically owning the practice.

This model is still in its early stages in the legal space, but it's worth watching. The same dynamics that played out in healthcare and are now well underway in wealth management and accounting will likely follow.

WHAT THIS MEANS FOR THE RIA SPACE SPECIFICALLY

The wealth management industry is still relatively early in this transition. There are still more new investment advisory firms forming each year than are being acquired. Advisors continue to break away from wirehouses — from Merrill Lynch, Morgan Stanley, UBS, Goldman Sachs, Wells Fargo, and the private banks. That inflow keeps creating new firms at the smaller end of the spectrum.

But the tension is already real. At the NAPFA conference in particular, I had substantive conversations about the values dimension of this question. Many NAPFA members are deeply committed to being fiduciaries, and many of them are not comfortable with the idea of selling to a PE-backed aggregator out of concern that doing so could create pressures inconsistent with their clients' interests. That doesn't mean every PE-backed firm is bad — there are plenty of advisors inside those structures who remain genuinely committed to fiduciary practice. But for a firm whose identity is built around independence and client-first decision-making, the calculus is different.

TRUE MERGERS OF EQUALS ARE RARE

One thing I want to be direct about: most deals that are positioned as mergers are actually acquisitions. A true merger of equals would mean the principals of each firm continuing to run things at genuine parity. That rarely happens. Usually one party is larger, or younger, or positioned to take over as the other principal rolls toward an exit. The framing may be a merger, but the structure and power dynamic tell a different story.

This matters for anyone thinking about these options for their own firm. Understanding what you're actually agreeing to — and what you actually want — requires clarity about the deal underneath the label.

THE TRADES AND OTHER SERVICE INDUSTRIES

This isn't a financial services story alone. You're seeing similar consolidation in the trades — roofing, gutters, electrical, HVAC. The so-called "unsexy" industries where larger, professionally managed companies are acquiring mom-and-pop operations and creating scale. The mom-and-pops still exist and many of them still do well. But the competitive dynamics are shifting, and the middle of those markets is getting harder too.

The pattern is consistent enough across industries that it's worth treating as a principle rather than a coincidence: when significant capital enters a fragmented industry and consolidation begins, the middle gets squeezed.

WHAT YOU SHOULD BE DOING NOW

Whatever industry you're in, the most important thing is to be conscious about this. You don't want to end up surprised by something that's been building for years. Here's what I'd encourage you to think through.

Know what stage your industry is in. Has PE money just started coming in, or is this five-to-seven years along? Look at the accounting industry as a reference point for a more mature version of the story. Know where wealth management is right now. And ask yourself honestly where your industry sits on that arc.

Know what you actually want. The options aren't binary. You can grow organically, pursue an internal succession, tuck in acquisitions of your own, look for a merger of equals, or make a deliberate decision to remain a boutique. Each has trade-offs. But making the decision consciously — before external forces make it for you — is where the leverage is.

Know what you're willing to trade. At NAPFA, I spoke with advisors who fully understood they were leaving significant exit multiples on the table by choosing not to sell to certain buyers. They made that choice with open eyes, because for them the alignment of values mattered more than the maximum price. That's a legitimate decision. What's not legitimate is letting it happen unconsciously.

This is the same kind of thinking we explored in my conversation with Tom Dillon in Episode 350, where the conversation turned to how advisors can build firms that attract acquisition interest on their own terms. And it connects to what I talked about in Solocast 77, where I went deep on the building blocks of succession planning and what it actually takes to create meaningful optionality.

PLAN FOR IT, DON'T BE SURPRISED BY IT

The barbell effect is not a distant threat in most of these industries. It's a structural reality that's already playing out. The firms that navigate it well are the ones that stay clear-eyed about where the market is going, make deliberate decisions about where they want to position themselves, and build intentionally toward that position rather than simply reacting.

If you're not thinking about this right now, you probably should be.

Tune in to this solo cast to hear my full analysis of the barbell effect, what it means for wealth management and other service industries, and how to start thinking about your own positioning.

Listen to the full episode of the DealQuest Podcast: [Available on all major podcast platforms]

FOR MORE ON COREY KUPFER https://www.linkedin.com/in/coreykupfer/ https://www.coreykupfer.com/

Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

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