Charles Schwab Advisor Services released results of its 15 th semi-annual Independent Advisor Outlook Study ( IAOS) today at its annual EXPLORE ® conference. Bernie Clark, executive vice president and head of Schwab Advisor Services, cited IAOS findings as he spoke with an audience of more than 160 independent registered investment advisors (RIAs) about the significant opportunity for growth over the next decade, as the next generation of clients – which Schwab calls ‘ Generation Now’ – begins to actively seek financial advice and guidance to help them meet their financial goals. Currently, those between the ages of 30-45 control nearly $3.5T in investable assets. 1
- With $16T in total wealth transfer anticipated by 20502, advisors are divided on whether the next generation investor presents a risk, an opportunity or simply a challenge. When asked about the movement of money to the next generation and the fact that assets could be spread out across more people or children:
- Thirty-seven percent of advisors see risk and believe they will need to develop new client relationships that will enable them to grow their business and maintain asset levels.
- Forty percent see an opportunity to develop a model to meet the needs of emerging clients and smaller accounts.
Attracting the Next Generation of Wealth: Differentiation, Centers of Influence (COI) and Social Media
- Demonstrating firm expertise and services is the top priority (91%) for attracting the next generation and is deemed extremely or somewhat important by advisors in the study, followed closely by three actions all tied at 83 percent: having a strong reputation based on firm reviews and centers of influence relationships; offering a unique service or value proposition; and clearly communicating the benefits/differences of the RIA model.
- When asked about the extent to which members of their firm can effectively articulate the firm’s value proposition to prospects, clients and influencers, a full 90 percent of firms report that client-facing advisors can do so all or most of the time.
- Approximately one third of independent advisors (32%) consider referrals to be a formal and routine aspect of their firm’s culture, but more than half (55%) say that the role of referrals is informal and is up to individual advisors – some ask for referrals and some do not. Sixty-nine percent of advisors believe cultivating client referrals differentiates their firm.
- Fifty-five percent of firms report that they measure staff performance based on the amount of new assets they bring to the firm.
- With respect to cultivating the next generation of investors, half of advisors (53%) believe reaching the next generation will require engagement with entirely new COIs, while 47 percent believe that the current COIs will remain relevant.
- Fifty-nine percent of study participants reported social media and online resources are used mainly as a tool for marketing and raising firm visibility versus a means of increasing engagement with current clients. Social media is noted, however, to be vital to communicating with the next generation of clients by 32 percent of firms. Advisors firmly believe (68%) that in-person contact will remain the crux of their business and that social media can never replace personal interaction.
RIA Firms of the Future: Legacy, Competition and Service Offerings
- Seventy percent of independent advisors have plans for creating a legacy firm – one that lives beyond its founders. Of these, close to half (48%) are planning an internal succession/partner buyout.
- When considering the next generation of leadership for their firms, independent advisors are focused most often on cultivating leaders from within (37%), versus looking externally (14%). However, almost one third (30%) are not attempting to grow the firm’s leadership in the near future.
- Over half (56%) of independent advisors believe automated portfolio management (“robo advisors”) could supplement their current offer/help grow their business, versus 44 percent who consider them an increasing threat.
- In terms of their service offerings, many advisors are staying with their core investment advisory business – long term financial planning, including retirement planning (54%), planning related to clients’ employer-sponsored retirement accounts (47%), charitable planning (37%), estate planning services (35%) and workplace retirement plans for business owners (34%).