The wealth management industry is changing fast, and RIAs that want to stay at the forefront of this evolution must adapt or be left in the past.
This was the overarching theme of a recent CFA Society of New York panel, on which HighTower CMO Abby Salameh, Pershing CEO of Advisor Solutions Mark Tibergien, Procyon Partners CEO Phil Fiore and moderator Louis Diamond of Diamond Consultants discussed the future of the independent and wirehouse channels.
So, what’s changing?
#1 – The industry is increasingly fragmented
On Wall Street recently reported that the first six months of 2019 saw 14 transitions of $1 billion or more, representing more than $45 billion in AUM. Of those transactions, some created RIAs, some went wirehouse, some went to boutique firms and some went regional. This is a notable shift away from past trends, which saw large wirehouse teams moving on to other wirehouses.
#2 – Advisors aging out of the business
Succession planning is top-of-mind for many RIAs, and this marks another drastic shift from the way the independent space has operated in the past.
“Historically, someone would accumulate a book of business, grow it, build great wealth and then die,” said Tibergien. “That was really the solo practitioner mentality.”
But today, firms have an eye toward keeping their legacies going long after their founders have retired. By bringing in associate advisors and giving them several years to acclimate to firm culture—and learn what clients expect from the founder-advisor—the next generation of wealth managers can carry on the firm’s traditions and values. Successful advisory firms build their businesses around the continuity of the practice, not around the personality of one specific advisor.
#3 – New clients will come from different places
According to a recent article, the CFP Board states that there are more advisors over the age of 70 than under the age of 30, and their clients are even older. The biggest challenge in succession planning is finding new clients to replace the old regulars. And when it comes to finding this next generation of clients, Salameh said the revolution will likely be digitized.
“Are there clients for advisors to serve in that next generation? Of course,” she said. “But we need to figure out how to attract them and work with them. Right now, it’s all about their phones – they are going to start off their experience with investing on some sort of digital platform, and we need to be in front of that.”
#4 – Diversity is no longer optional
The financial world has long been dominated by white men, but that is shifting quickly. Women are taking charge of their financial lives and the financial lives of their families; and, the United States is set to become a “minority-majority” country within the next 20 years. The future of the industry will need to look different than it has in the past.
Advisory firms must start thinking outside the box when it comes to hiring a more diverse workforce, the panelists agreed. Whether it be casting a wider net, offering modern benefits that give more work/life balance or making an effort to recruit at college job fairs, successful advisors will do everything they can to help ensure their firms reflect the face of the future.
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