Client demand and technology driving move to comprehensive wealth management

How registered investment advisory firms operate, the advice models they use, and the composition of their teams is undergoing vast change. That was the message delivered by Bernie Clark, executive vice president and head of Schwab Advisor Services, to the more than 4,000 advisers and industry executives assembled in San Diego in late October for IMPACT.

“If you want an enduring business, you must change,” he said, noting that the role of the adviser is shifting. “Today, what advisers do can include estate planning, tax preparation and legal work, and other value-added services like career and estate planning or life coaching . . . nothing is off the table anymore.”

Clark’s comments on a shift in the RIA business from a concentration on portfolio management and asset allocation to a broader focus on wealth management came in connection with his discussion of the findings of Schwab’s recently completed Independent Advisor Outlook Study (IAOS). The tenth anniversary edition of the Study provides a decade of data on independent advisers’ views of the industry, their businesses, their clients, and the investing environment.

The IAOS found that 78% of advisers believe technology will have a noticeable impact on how their firms operate over the next decade, and nearly all (94%) agree that technology will enable firms to serve clients more efficiently.

“To be sure, we need the best technology, but we can’t let technology detract from relationships,” Clark said, noting that all the technology in the world can’t model how a client feels.

Because of the centrality of human interaction in the advisory relationship, advisers consider finding and retaining talent to be among the most critical business challenges over the next ten years. And the ability to embrace change is the characteristic most advisers (81%) report being especially impressed by as they interview and hire younger job candidates, said Clark, referring to a key IAOS finding.

Addressing the importance of attracting and developing top talent, Clark said that firms need employees who “have credibility,” which he defined as “a combination of character plus competence.” Credible employees are essential for the creation of brand loyalty, which RIA firms will require to grow in the more competitive environment of the future, said Walt Bettinger, President and Chief Executive Officer of the Charles Schwab Corporation, who joined Clark onstage after his remarks for a far-ranging discussion on the state of the industry and its future.
Since regulatory changes and customer demand are driving all advisers to resemble investment advisers, RIAs must sharpen their brand, Bettinger said.
“Brokers are working hard in the eyes of the client to look like you,” he told the assembled RIAs, “which means that the greatest challenge of the next 20 years for us in this industry is that ability to re-differentiate ourselves from those who are following your success and wanting to look and act and to appear to clients just as you do.”
“The initial fantasy of robo advice taking over is dead,” Bettinger said, “because the human relationship is what investors want, and it’s the central value of advisers.”
He observed that the adviser’s role is changing and that it is now almost psychological in nature, helping to keep clients focused and calm during periods of market upheaval.
“Trying to outsmart the market is yesterday’s game,” Bettinger said. “Today it’s about planning, setting goals and correcting things along the way.”