The majority of independent advisers remain bullish about the advice industry, but are concerned that increased competition could stunt growth more so than the market volatility spurred by COVID-19 and its economic impact.
Of the more than 1,300 independent advisers that responded to Charles Schwab’s Independent Advisor Outlook Study released during the Schwab IMPACT Conference Tuesday, 91% expect continued growth for the RIA industry with top growth drivers being preference for the independent model (64%) and technology (20%).
However, there is one notable barrier to growth that advisers are paying attention to. Interestingly, the majority of advisers (23%) say new forms of competition are the most concerning — outpacing the impact of COVID-19 (18%) and ability to differentiate from competitors (16%).
CenterPoint Financial, a Montpelier, Vermont-based RIA, has taken note of the “very real threats” to its business out there including discount brokers, robo-advisers and free-trading apps like Robinhood that attract the younger investor, according to President and Founder Priscilla Gilbert.
“I’m very aware that the services that we provide at Centerpoint are beneficial to the individuals and families who already have developed their financial base,” Gilbert said during a panel discussion hosted by Schwab last Friday to discuss the study’s findings. “But our services, frankly, aren’t as valuable to that young investor who just needs to start saving, and doesn’t really need the full complement of our services.”
Yet, Gilbert said she remains optimistic that as the pandemic continues to play out, investors will miss the personal relationship with an adviser that these digital platforms lack. “I’m confident that word will spread that there are better options for financial services than the institutional trading of broker-dealers and robo-advisers,” she said.
Still, advisers have undoubtedly felt an immediate impact from COVID-19 on their firms.
Almost half (42%) of RIAs expect lower growth in net new assets this year compared to original projections. Meanwhile, the average expected growth rate in new assets by the end of 2020 is now 11%, with most growth (93%) coming from organic sources (existing and new-to-firm clients) versus inorganic growth like M&A activity.
Moreover, while staffing levels remained stable, over a third of advisers have been working more hours (37%) compared with less hours (11%) and no change (52%).
For Calabasas, Calif.-based RIA Morton Capital, the biggest change has been the realization that as an organization it has to focus on the employee experience in times of volatility, just as much as the client experience, according to Morton Capital Chief Operating Officer Stacey McKinnon.
“We have to remember as leaders that our team members are going through the same stresses our clients are — whether that’s financial and physical health being under attack or the election, natural disasters, social justice — all of these things have made an impact on our people and the ability for them to perform,” she said.
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