In 2021, head of Schwab Advisor Services Bernie Clark declared, “The RIA industry is unstoppable.” His words have proven true as RIAs have seen incredible growth in recent years. In 2022, assets under management increased 19.5% year over year, and revenue grew more than 23%.
With that strong industry growth comes change, especially as markets face challenges and client demands and preferences evolve. RIAs with an eye toward the future can provide leading client services and create a competitive advantage for bringing in new revenue.
Here are three ways the RIA industry is changing.
Changing Client Demographics and Priorities
A new generation of clients is entering the wealth management space, but what they expect from the experience differs from previous generations. Over the next few decades, younger Americans are expected to inherit $30 trillion of wealth. And many of them will be bringing that wealth to RIAs.
Millennials and Gen Z have different life experiences than their predecessors, which comes through in everything from how they want to interact with advisors to their financial goals.
To connect with these younger clients, RIAs will likely need to adapt their client experience strategies. Younger investors tend to want both the convenience of technology as well as the “human touch” provided from working with an actual person. They probably won’t visit your office in-person, but that doesn’t mean they don’t want an active relationship with their advisor. With the growth of robo-advisors and other automatic investing tools, providing a strong, personalized relationship becomes a powerful competitive advantage.
Adapting to this industry trend requires getting to know new customers and expanding into new technology for marketing and onboarding, as well as new types of products and accounts. But RIAs that can build strong relationships with younger clients will set themselves up for incredible growth in the coming years.
Transitioning Advisors and Acquisitions
The past few years have seen more advisors move from larger firms to independent practices. The pandemic showed many financial services professionals that working from home is possible. That new mindset, paired with secure technology, has made it more cost-effective for advisors to move to an RIA or hybrid model. More than 1,600 advisors become RIAs annually, representing the fastest-growing category in wealth management since 2016.
Many RIA firms are now entirely virtual, which opens the possibilities for a diverse staff to meet the needs of clients across the country instead of being limited to who is in your geographic area.
With more advisors entering the RIA space and existing RIA firms transitioning to hybrid or remote models, mergers and acquisitions are also up. RIA M&A activity is reaching record highs (deal volume rose 11.1% in 2022) and creating more opportunities for solo or smaller RIAs to join forces with larger groups.
Advancements in AdvisorTech
As technology advances across other industries, it has also reached the RIA space. Successful RIAs are going digital and leveraging technology to streamline internal processes and provide a more robust client experience.
By embracing digital tools like online client portals and virtual meetings, RIAs can connect with clients in new ways and empower them to reach their financial goals. As discussed above, this digital growth is especially crucial for connecting with younger clients. Digital transformation has become a differentiator that matters to clients and helps advisors stay connected to provide personalized recommendations and advice.
Internally, digital tools help RIAs stay in compliance, especially as regulations change. By keeping documents organized and secure and streamlining processes like new client onboarding and account opening, technology allows RIAs to scale and expand their offerings. Instead of spending time on manual tasks, RIAs can now automate many tasks and focus on building client relationships and growing their business.
The RIA industry is growing and changing at a breakneck pace. This staggering growth will likely continue, especially for advisors who embrace the change and evolve with market and client demands. Docupace is the best tool to make the most of your business. The new RIA Productivity Suite streamlines processes, integrates into existing systems, and provides a smoother back-end and client experience. Click here to learn more and schedule a free demo.
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