Thirty or 40 years ago, when brokerage platforms were the dominant back-office service vehicle for independent financial advisors, it wasn’t that easy to foresee the complex level of services independent advisors would need and demand.

At that time, most advisors were working with clients who were in the asset accumulation stages of their financial lives. Many older clients in those days still had pensions, so the need of that era’s World War II generation for assistance in generating retirement income was a fraction of what it is today.

Over the next two decades, the RIA business model raised its visibility, offering fewer conflicts of interest while often, not always, putting advisors and clients on the same side of the table. Many brokers transitioned to the RIA model, and others became hybrid RIAs.

Charles Schwab, Fidelity Investments and TD Ameritrade built huge custodial platforms while independent broker-dealers watched their businesses move in the same direction. LPL Financial and Raymond James Financial led the charge for IBDs, but as this month’s broker-dealer survey and cover story by Eric Rasmussen indicates, most of their rivals have followed.

The vast majority of IBDs now derive the lion’s share of their business from fees related to asset management, just like custodians, and a growing number of their reps are fee-only. But the business of servicing advisors is far more complex than it once was.

Part of the reason is that today’s end clients, mostly baby boomers, have more intricate needs, like maximizing retirement income on a tax-efficient basis, than prior generations. The upshot is that service providers are learning how difficult it is to provide value-added services to an increasingly demanding advisory world. Word has it that some of Wall Street’s most sophisticated institutional brokerage firms are discovering that competing with the big IBDs and custodians is a lot harder than they imagined.

Another challenge that is national in scale is that there simply are way too few advisors to meet the demands of the American public. For IBDs and custodians alike, there is a need to replace retiring advisors to maintain their networks.

Fintech services and robo-advisors may fill some of the gap, but only a small part of it. A recent Vanguard survey found that 90% of people using robo-advisors wished they had human advisors. That’s good news for you the advisor but bad news for America’s overall retirement future. 

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