Steward Partners CEO tackles AI, M&A and hybrid RIAs

Sorry sci-fi fans, but the rise of artificial intelligence (AI) is not going to sink the RIA industry. Clients will always need - and value - financial advice delivered by human beings for human beings.

Where AI will shake-up the wealth management arena, according to Steward Partners CEO Jim Gold, is its ability to improve the manner in which that advice is communicated.

“For 30 years, going back to online trading, there's been this industry fear over the ‘death of advice.’ I remember the commercial with a truck driver having his own island,” said Gold. “I think the threat is not to advice.”

The growth of AI and other tools to better connect advisors and clients is only the latest trend Gold sees the RIA world undergoing. A longer running movement is the shift from wirehouse operators to independent RIAs like Steward Partners, which at last check oversees $35 billion in client assets, facilitated by a network of over 250 independent advisors across 59 offices.

In fact, Gold sees that trend as “underreported” despite its longevity.

“I think if you look at the data in the last 20 years, those firms have gone from over 50 percent market share to 37 percent market share. Yet, talk about record productivity, record Advisor, headcount and all of that is going to some form of independence,” said Gold. “I think there's really a generational shift taking place right in front of our eyes.” 

While the shifting tide away from wirehouses to independent RIAs may not getting as much airtime or press as it used to, there has been a lot written and reported of late about so-called hybrid RIAs. Gold believes the hybrid RIA model offers increased “optionality”, something which Steward highly values.

“I think the trend there is the big getting bigger and they are going to win more. I think scale used to be at $2 billion or $3 billion for an RIA, say 10 or 15 years ago. Back then, that may have been considered an RIA of size or a hybrid of size. Now that number is $10 billion,” said Gold. “I think that's actually helping to drive M&A inside the space.” 

Speaking of M&A in the RIA arena, and the private equity money driving it, Gold sees it as a positive factor, not to mention a validation of the trend toward independence.

“These are sophisticated investors that are saying ‘this thesis is real’,” said Gold. “And it is still in the early stages. I think it's actually a real benefit to the wealth management space to have that private capital to utilize and to grow.”

One widely reported trend that could potentially undermine the growth of the wealth management industry is the potential retirement of up to a third of working advisors over the next decade in a demographic-based exodus.

Gold, for one, is confident those advisors will be replaced. The challenge in his view is the quality of the wealth managers that will take their places.

“Are you bringing in people who are equally as talented, and how do you get them?” asked Gold.

“To me, succession is a multi-year process,” Gold said. “It's not something you decide today in June and say ‘Hey, I'm going to wrap it up at the end of the year.’ You have clients to think about and you have your team to think about and you have to think about the monetization of the practice you built. That’s a lot and I think people need to give it time to make sure they do it right.”