Each year financial advisors say they anticipate continued growth in the industry, and each year the expectations are met. This year is no different, according to Schwab Advisor Services.
Almost all (95%) advisors who took part in the Schwab Independent Advisor Outlook Study released Monday said they expect the financial services industry to grow faster than the market, or at a slow but steady pace over the next year.
“The factors that are driving growth will continue, including the fact that investors’ desires to work with a fiduciary are getting stronger,” Bernie Clark, head of Schwab Advisor Services, said during a webinar unveiling the latest iteration of the survey. “Every year advisors say they are bullish on growth and every year they produce it.”
For the survey's 14th annual go-round, Schwab Advisor Services polled 953 independent investment advisors who custody assets with Schwab. During 2020, advisors added more clients than in previous years and most see continued accelerated growth ahead, the survey said.
“Advisors also expect some of the changes from 2020 to continue to impact their businesses: remote work is shaping new opportunities for connecting with clients and recruiting talent, and firms are becoming more flexible and adaptive to change and are establishing new business workflows,” Schwab said. “In the COVID-19 environment, innovation played a role in helping the industry grow, and most advisors see opportunities for continued innovation-driven growth coming from within and outside of the industry."
Clark noted that growth within the profession is coming from adding clients and growing existing clients, along with mergers and acquisitions. “Retention of existing clients is a big part of organic growth,” he said.
Possible headwinds affecting growth include increased competition, higher business costs and failure by advisors to differentiate themselves from competitors, the survey said.
Timothy Admire, president, CEO and managing partner at Willow Creek Wealth Management in Sebastopol, Calif., said his firm saw strong growth last year. “We have had a lot of success with referrals because of our strategy last year of staying in investments,” Admire said during the webinar.
“But we still have a lot of maturing to do [as a profession]," he added. "Many investors do not know what a fiduciary is or what an RIA is. We have a lot more work to do as an industry, but that work is going to be a strong driver for growth in the future.”
From another perspective, Jim Weil, managing partner of Private Vista, a financial services firm in Chicago, said, “Professionalism is growing in the industry. Growth at our firm has allowed us to gain scale, which has helped us leverage more mergers and has helped with talent retention.”
The webinar participants agreed that the wealth management space is being challenged by a shortage of talented advisors.
“There are not enough people coming into this industry, and this is not a geographic problem—it is industry wide,” Admire said.
The coronavirus pandemic forced firms to adopt digital solutions at a faster rate than they would have otherwise, added Jalina Kerr, senior vice president of client experience at Schwab Advisor Services. “As other things begin to return to normal, we expect the accelerated innovation to continue.”
A majority of advisors (57%) said they prefer to be independent, although that percentage is down a bit from last year’s study which showed 64% preferred the independent business model.