Julian Heron, CFA lays out the case for a third way: how independent RIAs can gain enterprise-level resources, real liquidity, and succession clarity without giving up what they built.
Originally published: March 27, 2026
Originally appeared on: BakStack by Phil Bak
Reading time: 8 min
This piece was originally published as a guest post on BakStack, the Substack publication of Phil Bak, investment industry veteran and founder of Armada ETFs. We are republishing it here for advisors who want a deeper look at the structure, philosophy, and challenges behind the Sovereign Path Fund. The full original post, including Phil’s introduction, lives at philbak.substack.com.
The RIA industry is under a familiar kind of pressure. Assets are up. Revenue looks strong. But the cost of staying independent keeps climbing: technology, compliance, hiring, succession planning. The operational drag is real, and it compounds.
Most owners eventually face what looks like a binary: keep grinding it out alone, or sell to an aggregator or private equity platform and accept what comes with it.
Neither option feels right if you actually care about what you built.
That tension is what the Sovereign Path Fund is designed to resolve. When Phil Bak invited me to write for BakStack, I wanted to do more than describe the fund. I wanted to explain the logic behind it, where the idea came from, and why the failure modes of every prior model shaped the structure we landed on.
“You don’t have to choose between scale and independence. You can have both, if you build the structure right.”Julian Heron, CFA. Founder, Sovereign Path Fund
Where this idea came from: the GIS model
Before I entered the RIA world, I was part of a company called Global Imaging Systems. GIS was a decentralized family of companies in the office technology space. They invested in people, measured every KPI imaginable, and built real enterprise-level infrastructure. But the non-negotiable was local independence. Local brands stayed local. Decision-making stayed close to the customer.
The result was a company that consistently outperformed benchmarks on growth, margins, and retention, not by centralizing control, but by decentralizing it.
That model stuck with me. When I eventually became an independent financial advisor, I ran face-first into the same structural problem GIS had solved thirty years earlier: fragmented owner-operators who were too big to be small and too small to be big, stuck between going it alone and getting absorbed.
The difference is that in the RIA world, no one had built the structure that GIS built. Not yet.
What makes Sovereign Path Fund different
- Permanent capital: no PE sponsor, no fund life, no forced exit timeline
- Tax-deferred entry via Section 721 exchange: no taxable sale required
- Full operational control retained by the founding advisor
- Shared enterprise infrastructure: compliance, technology, HR, benchmarking
- Liquidity windows and pledge-based lending against fund units
- Gen 2 succession built into the structure, not bolted on later
- Founder governance: no external GP extracting carried interest
The false choice independent RIAs keep being offered
The aggregator pitch is well-rehearsed at this point. Here is a check. Sign here. You get shared resources, some liquidity, and relief from the operational weight. The first year often feels like a genuine relief.
By year two, reporting requirements multiply and mandates tighten. By year three, the private equity clock is running, because PE does not buy RIA firms to hold them. They buy to sell again at a higher multiple within a defined window. Your firm becomes a line item in someone else’s exit strategy.
For advisors who left wirehouses or broker-dealers specifically because they wanted to control how they serve clients, watching that independence erode is exactly as painful as it sounds.
The alternative, staying independent and building everything yourself, carries its own cost. As Michael Kitces has documented, overhead and complexity tend to rise right alongside revenue as firms grow. Margins compress. The freedom that made independence attractive becomes harder to protect.
“The structure is designed, the governance is built, the modeling is done. We are actively recruiting founder-level firms who want to help shape what this becomes.”Julian Heron, CFA
How the Sovereign Path Fund is structured
The fund is built as permanent capital. RIA owners contribute their firm equity using a Section 721 exchange, the same tax-deferred mechanism partnerships have used for decades. The fund holds the equity. The owner keeps running their firm. They receive units in a diversified vehicle, which means they have gone from 100 percent of their net worth concentrated in a single practice to holding a position across a portfolio of RIA firms. That is real risk reduction that does not require a taxable sale.
Inside the fund, firms share enterprise resources: technology, compliance infrastructure, benchmarking, operational best practices. The fund charges a transparent platform fee. No performance fees. No hidden management company economics. Owners keep their cash flows and control their daily operations.
The fund is also designed to support liquidity windows and pledge-based lending against units over time, so owners can access capital without triggering a taxable event. For succession, the structure allows generational transitions. Gen 2 leaders can earn equity in the fund, aligning them with the long-term health of the portfolio rather than just the single firm they happen to work at.
What makes this hard to build
I want to be direct about the challenges, because the advisors we want to work with are sophisticated enough to spot a pitch that glosses over them.
The first is credibility. The fund is pre-launch. There is no ten-year track record to point to. What exists is a Monte Carlo simulation across more than 300 randomly generated RIA firm profiles of varying sizes, showing the economics work for the vast majority of independent firms in our target range. Modeling is a hypothesis, not a track record. Asking a successful RIA owner to contribute their life’s work into a hypothesis requires trust that is built over time, not declared.
The second is governance. When the investors are also the operators, every incentive has to be aligned. Every conflict has to be anticipated and addressed in the documents. Who approves liquidity windows? Who decides on new firms entering the fund? What protections exist against the fund itself being sold or restructured? These are the questions that matter most, and we have spent a disproportionate amount of time on them. Not because governance is exciting, but because if it is wrong, none of the economics matter.
The third is sequencing the launch cohort. The founding firms will represent 100 percent of the fund at the start, which means concentration is real. These founders are not joining someone else’s machine. They are building the machine together. Who they are and what they have built matters for the long-term health of the platform.
The fourth is education. This structure touches succession, tax efficiency, Gen 2 equity, operational infrastructure, and business model design all at once. Most advisors have never had to think in those terms simultaneously. The pitch requires a real conversation, not a one-page summary. That is a heavy lift, but it is also a filter. The owners who take the time to understand the model tend to be exactly the kind of people we want building this with us.
Why this matters beyond one fund
Private equity and family offices have long had access to permanent capital structures, tax-efficient transitions, and shared infrastructure. Independent operators and their clients generally have not. Over time, this fund is designed to change that: to give everyday advisors, and eventually their clients, access to the kind of vehicle that institutional money has enjoyed for decades.
Independent RIA owners are not just running businesses. They sit across from families, retirees, and small business owners, helping them make some of the most consequential financial decisions of their lives. When PE rolls up those firms and puts them on a clock, something real is lost for the advisor and for the people they serve.
Protecting the people who chose independence, and building something that keeps that choice viable for the next generation: that is the bet. And it is one I am making with my own capital and career.
Ready to explore the third way?
The full investment memorandum covers the exact fund structure, governance, economic modeling, and founder benefits. Available only to qualified RIA owners under NDA.
Julian Heron, CFA
Julian Heron is the founder of Credentialed Wealth Advisors and PeerPoint Funds, and the architect of the Sovereign Path Fund. Before entering the RIA industry, he spent years inside Global Imaging Systems, one of the most successful decentralized roll-ups in American business history. He is building the Sovereign Path Fund alongside a growing cohort of founder-level RIA firms.