The breakneck pace of industry consolidation presents a web of new challenges for early-career advisers, according to a discussion of past and present InvestmentNews 40 Under 40 winners.
Merger and acquisition activity in the industry is on track for another record year. Billion-dollar RIAs, once unicorns, now number in the hundreds. Private equity interest in the industry’s recurring revenue streams appears poised to keep the consolidation rolling.
The industry’s next generation grappled with these trends during the Future of Our Business event, held in New York on Wednesday.
At the firm level, industry consolidation means tougher competition, particularly for smaller shops.
“The pace of change is really quick so you can’t be complacent,” said Leah Jones, director of financial planning at Hightower Bethesda. “Practices need to evolve to stay competitive with larger organizations. The only way you can do that is by leveraging technology.”
Indeed, the proliferation of advisory technology and outsourcing solutions allows advisers to broaden their service offerings, attendees said. Advisers just need to be cognizant of their value proposition and know when to refer clients to an outside specialist.
“You can compete with a big firm by showing that depth,” said Katie Brown, founder and principal of Morton Brown Family Wealth.
Small firms can compete in a consolidating industry, but they need to make early decisions about how to structure their businesses, especially in a profession that often figures equity into its compensation packages. As Brown put it, new firm owners need to make a “conscious decision between a lifestyle practice and building an enterprise.”
The next generation client also can be a challenge for the advice industry and advisers of all ages will need to adapt to sharing more of themselves.
Younger clients are more willing to provide information with advisers and connect with them on a personal level, according to attendees. Gaining their trust, though, means advisers will have to share more of themselves and be creative in spreading their message on social media, podcasts and other platforms.
In fact, getting to know more about clients’ personal goals may be the only way to keep them on track for the long term.
Ka’Neda Bullock, founder and CEO of Master Plan Investment Group, pointed out that deep knowledge of clients can help reorient them in down markets.
“It’s not just about market performance,” Bullock said. “It’s about what you’re trying to achieve and why you invested.”
That may be especially important for younger investors, who have little experience with prolonged downturns. Forty-year-old investors today, after all, were just entering their prime earning years in 2008. The brief pandemic crash notwithstanding, many of them have benefited from a bull run their entire investing lives.
But reminding clients of their goals and helping them along their personal journey requires a shift from basic know-your-customer compliance to proactive and ongoing conversations about goals, risks and tradeoffs.
A $141M judgment and a federal asset freeze collide over one shrinking pool
The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.
Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.
CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.
The bank has swiped three private banking veterans from BNY as the city climbs the ranks of America's fastest-growing wealth hubs.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
