RIAs are confronting a more crowded, competitive market when it comes to winning new clients, as affluent individuals grow more cautious and more wirehouse brokers embrace the RIA model, says Nick Georgis, Schwab Advisor Services's vice president of practice management and business strategy.
RIAs are finding that it is taking longer to close new business prospects and they are closing less business, Georgis said in an interview. Increasing client inertia is one reason why.
"There is more caution on the part of the client and investors are more fearful," Georgis said in an interview at Schwab IMPACT's annual conference in Chicago. "They are interviewing more advisors and finding more people who are taking a holistic approach advice [business]."
As the exodus of wirehouse brokers to the RIA and independent broker-dealer models continues, RIAs are more likely to find a competitor who looks just like them right down the street. In the next five years, they are going to find themselves competing with even more people who do and look like they do, Georgis believes.
The RIA business is growing assets at an annual rate of about 7% while the wirehouse world is shrinking at a 4% annual rate. Project this out four or five years and the picture of a crowded RIA market emerges.
Schwab now has 18 full-time consultants devoted to assisting RIA firms with practice management and succession issues and another 100 relationship managers who advise in less detail and then refer RIA firms to two-day off-site meeting with the consultants. "Succession isn't just about transferring a business; it's about transforming it," Georgis said.
RIAs may not like being measured by their assets under management (AUM). But for every two firms that reach and easily surpass the $500 million or $1 billion AUM level, there are eight or nine firms that reach those levels and see their business plateau.
-Evan Simonoff