According to registered investment advisors surveyed in Schwab Advisor Services’ latest Independent Advisor Outlook Study, sustained growth lies ahead for the independent advice industry.
Nearly all firms (93%) expect that growth will continue over the next five years, with a projected uptick of 17% in terms of the average net new assets expected per year over that time. The top reported growth driver is acquiring new clients (64%), with nearly 6 in 10 advisors (57%) looking to attract new clients who began investing in the past 18 months. According to the study, they plan to do this via:
- a combination of working with existing clients to reach the next generation;
- using technology more;
- recruiting younger advisors; and
- offering new solutions and services.
Beyond adding new-to-firm clients, growth is also expected to come from building relationships with centers of influence and driving referrals (36%), and growing existing client relationships (34%), the study notes.
“As we begin 2022, we reflect on the previous year when industry growth topped all-time highs across firms of every size,” says Jon Beatty, Managing Director and Chief Operating Officer of Schwab Advisor Services. “We think the trajectory is only going to continue, and we are looking forward to working alongside advisors to help them chart and manage their growth, compete for new client assets, and build firms with a common purpose and strong culture.”
Growth Levers
While firms across the study mostly share a robust outlook on growth, the data shows that firms emphasize different ways to achieve it, including:
- Talent: Focusing on organizational structure, attracting and retaining talent, and anticipating skillsets needed for the future as they are essential to supporting growth.
- Sales and marketing: Making investments in sales and marketing to create strategies that meet target clients’ needs.
- Client experience: Using target client personas to better meet client expectations, creating strategies to meet clients’ needs, and identifying specific client segments for expansion.
Getting Personal
Understanding what investors want and delivering it at scale is viewed as a key part of the equation. In fact, more than half of advisors (52%) believe that investors are looking for added personalization within their investment portfolios over the next five years, the study notes. Of those clients seeking personalization, advisors believe that Millennials will lead the way (38%), followed by Baby Boomers (26%), Gen X (22%) and Gen Z (10%).
“Clients increasingly expect there to be an understanding of needs and values, and to have access to financial solutions that will align with them,” says Beatty. “The advisor/client value proposition has its foundation in a personalized understanding of the client, and the emergence of new tools and investment solutions to put values into action is opening a whole new opportunity for RIA firms.”
According to the findings, advisors appear confident that they will be able to scale the delivery of personalized investment solutions, with 81% believing this offering will be either “somewhat” or “very” scalable. Schwab further notes that they will be looking to adapt by:
- finding new ways of building and maintaining relationships with clients (59%);
- utilizing better tools or approaches to assess clients’ needs and values (56%); and
- providing education about investing to the whole family (51%).
Talent Strategy
Meanwhile, advisors at firms with two or more employees are confident that they can meet their clients’ current and future needs with their talent approach. Nearly all (92%) report their talent strategy reflects the needs of their current client base, and roughly three-quarters (74%) say they are also hiring today to ensure they have the skillsets they need for tomorrow.
Two-thirds of firms (66%) have a clear talent strategy in place to help them grow. Still, finding talent remains by far the greatest challenge. Nearly 4 in 10 (37%) firms cite finding talent as a top challenge, more than three times other areas of talent management.
As such, finding, developing and retaining talent is one of the leading barriers for advisors’ optimistic outlook on overall firm growth (No. 2), sitting between balancing time and priorities (No. 1) and creating operational efficiency (No. 3).
And while half of firms (49%) are focusing their recruiting within the finance industry itself, the other half is branching out into areas including sales, communications and technology. Among the top five attributes they seek: work ethic, attention to detail, team player mentality, ability to communicate with clients in person and commitment to the firm.
“We all have so many things constantly vying for our attention, not to mention so many options for managing our finances. That’s why the relationship between advisors and clients is so critical. By keeping the attention of clients and engaging with them, the relationship itself helps drive growth. And it is people who sit at the heart of these valuable relationships,” Beatty emphasizes.
The study was conducted for Charles Schwab by Logica Research, with responses coming from 723 independent investment advisors who custody assets with Schwab or TD Ameritrade Institutional, representing a total of $291 billion in AUM. The study was conducted from Oct. 12–28, 2021.
