Which channels are yielding the most new client assets for RIAs?
New dollars coming from brokerage clients — still the most common route — are shrinking.
Independent financial advisers are increasingly finding clients from a range of investor pools, not just snagging most away from big-name brokerages. In some cases, they are even stealing them away from firms that look a lot like themselves.
A new survey suggests registered investment advisers are attracting an increasing amount of new client assets from other RIAs, as well as finding eager customers among new investors and those who have been trading on their own.
Until recently, more than half of independent advisers said the majority of client assets they attracted came from full-commission brokers, according to several years of TD Ameritrade surveys. But the recent survey showed only about 28% of RIAs said big brokerages were their greatest source of clients in the past six months.
About 20% of advisers in the recent survey said the majority of their client assets came from other RIAs, an increase from 14% of advisers the previous year. Advisers attracting most new client assets from banks fell from 14% a year ago to 8% now.
But the survey added two additional client sources to the answer options this time around — and they turned out to be popular picks. About 17% of advisers said most new client assets came from self-directed investors and 10% said they came from clients who were new to investing, according to the TD Ameritrade survey of 302 advisers released Wednesday. So it could be that advisers were lumping some of these in with the full-commission-brokers option in years past. Even considering that possibility, there’s still been a falloff from brokers and a boost from competing RIAs.
Experts say the trend of RIAs attracting more clients from other independent advisers, which was even more evident among larger RIAs surveyed, suggests independent advisers increasingly need to differentiate themselves from direct competitors if they want to continue growing.
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“Ten years ago advisers breaking away from big firms had the mantra of offering clients more personalized service, of ‘quarterbacking’ clients’ financial lives, and being independent,” said Robert Sofia, co-founder of Platinum Advisor Strategies. “Now there are thousands of firms with that same value proposition.”
RIAs need to have their own unique look and feel, as well as actually be different from other independent advisers in terms of the investment strategies they provide for clients, the services they offer or the fee model they employ, he said.
“Financial planning is not a one-size-fits-all solution, or you might as well be a robo,” Mr. Sofia said, referring to automated investment advice providers.
The best advisers are doing things to attract clients from a variety of places and have figured out what makes them special and what types of clients tend to be the best fit for them, said David Richman, national director of the Eaton Vance Advisor Institute.
“The adviser who has a brand that would try to seem like they handle everybody, really at some level is not the adviser who tends to disproportionately garner new assets,” he said. “Focus on what you believe to be your edge.”
For sure, it’s not enough for independent advisers to trumpet their “objective thinking” as their differentiator, Mr. Richman said.
It doesn’t matter what type of firm the adviser works in, what’s important is to demonstrate a particular strength and a mutual fit for the client, he said.
Jon Yankee, partner and chief executive of FJY Financial, said his firm is attracting some new clients from the nation’s largest RIAs, especially those that focus on specific investment strategies. His firm concentrates instead on comprehensive financial planning, where investments are just a piece, he said.
“I think clients in general are becoming much more educated, and in some ways they are accepting more of a reality that you can’t predict the future and that passive investing is more interesting for them,” Mr. Yankee said.
The majority of FJY’s new business is coming from younger people who are new to having a financial adviser. Many of these prospects are investigating several local RIAs who offer similar services, and in those situations, the potential client is most likely to choose based on personality, he said.
Grant Rawdin, founder and chief executive of Wescott Financial Advisory Group, said his firm attracts some new clients away from RIAs, but the majority of new clients are still coming from wirehouses and banks.
Beacon Wealth Management also still attracts about half of its new client assets from wirehouses, said Tina Powell, a firm partner and owner of robo-adviser SheCapital.
She said most of her latest prospects have been self-directed investors who have been referred to Beacon. At SheCapital, most potential clients are people who have never worked with a financial adviser but now have had a life event that’s led them to search for one.
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Karen Altfest, principal adviser with Altfest Personal Wealth Management, said her firm has been inundated with prospects and new clients these first couple weeks of the new year, a time that’s coincided with great market volatility.
Many potential clients come to Altfest from wirehouses and other RIAs saying their adviser had a poor track record of calling them back. Others had been investing themselves, and the results weren’t where they wanted them to be. A few others have “huge amounts of cash” they’ve been sitting on and now they want to put it to work, she said.
“We always get a few people who come in because it’s a New Year’s resolution, but this year there’s really a lot,” Ms. Altfest said.
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