The growth and maturity of the independent advisor industry segment has brought new levels of competition among firms, particularly when it comes to attracting and retaining talent, according to the latest findings from Schwab’s Independent Advisor Outlook Study.
In the past five years, a third of advisors say their firm has hired someone directly from another RIA firm, and one out of five advisors say someone in the firm has left to work at another RIA firm.
Released at the 2018 Schwab IMPACT event for independent advisors, the study also shows that, when competing for talent, compensation not surprisingly is seen as the most important factor for attracting (61%) and retaining (53%), followed by clear advancement opportunities (31% for both attracting and retaining) and flexible scheduling (27% attracting; 31% retaining).
Differentiation
Differentiation is also essential, according to two-thirds of independent advisor respondents. When compared with wirehouse advisors, a majority of independent advisors feel that they are differentiated when it comes to acting in a client’s best interest (95%), understanding a client’s specific needs (84%) and understanding and supporting a client’s entire financial life (83%).
Client service and understanding clients’ unique needs were also cited as key ways in which RIAs say they differentiate themselves from other independent advisors, with two out of three advisors feeling there is differentiation in each case.
During the IMPACT event, Bernie Clark, executive vice president and head of Schwab Advisor Services, contended that the independent RIA industry was critical in helping lead investors out of the financial crisis, which helped lead to strong growth within the industry over the past decade.
The financial crisis also reportedly affected the way advisor firms conduct business in several ways. According to the study, among the changes that firms implemented as a result of the 2008 crisis include:
- technology used (61%);
- investment products used (48%);
- frequency of communications with clients (41%);
- emphasis on fiduciary duty (39%); and
- approach to marketing (32%).
On the other hand, most advisors report that over the past decade they have maintained their pricing (78%), as well as stayed the course with respect to their level of transparency with clients (72%) and investment philosophy (71%), the study notes.
Trendspotting
As for next-generation advisors, the study shows that the top three areas in which firms are looking to their next generation for insights include technology, marketing and firm culture. Interestingly, one out of three firms responded that they are not looking to younger advisors for input at all.
Meanwhile, 42% of respondents report that young advisors are most likely to advocate for using new technologies within firms, followed by operations staff (39%), client-facing staff (30%) and older advisors/employees (28%).
And while most advisors (70%) expect that the S&P 500 will continue to go up during the next six months, the study shows there is real concern about an eventual downturn. Seven in ten advisors (71%) report that they are somewhat or very concerned about the possibility of a downturn.
Clients are also mirroring this concern, with 8 in 10 advisors (82%) saying their clients worry about the possibility of a downturn and the same level saying that in the past six months they had to reassure some of their client base about achieving investment goals.
The online study was conducted for Charles Schwab by Logica Research (formerly Koski Research) from Aug. 24-Sept. 12, 2018, and reflects the responses of 783 RIAs who custody their firm’s assets with Schwab.
