Serving plan participants as one of the first robo-advisors, Financial Engines excelled at digital engagement and has a younger, fresh vibe to how it does things. Conversely, both Edelman and the Mutual Fund Store, which was acquired by Financial Engines in 2015, were built to serve baby boomers. What’s interesting about the new entity is how the wisdom across generations could be very powerful. For Financial Engines, the opportunity to serve rollovers and retirees is greatly helped by a strong national footprint. In addition, it now has specialized and credible expertise for the issues facing retirees and older people—retirement income planning, Social Security, long-term care.
At first glance, the robo-business and the bricks and mortar distribution system might seem best suited to different segments—digital offered for the young, human advice for the older investor. What I hope to see is a much more integrated digital-plus-human approach for every generation, something that would benefit all consumers and help regenerate an RIA industry past its prime.
Modernizing The RIA Model
The registered investment advisor model faces a set of challenges that must be solved. To grow as boomer assets wane, the industry needs to find a way to reach more and younger investors, deliver the great digital experiences today’s consumers demand and serve them profitably at a lower price point. There has been very little progress on this front, and it should be a concern for everyone who feels that the fiduciary advisor model is good for investors.
Edelman has already cracked the code on small accounts, but his pricing, up to 2%, raises eyebrows. With the scale FE/E will have, there should be economies that allow the firm to be competitive or even be a price leader. We can speculate that the look/feel and engagement experience in the RIA will get a refresh with the tech-savvy and more sophisticated style that the robo brings.
When the combination is complete, we will have the first true, national RIA with a war chest of talent and resources to go after market share from players like Schwab, Fidelity, Vanguard and the like.
Power Up The Marketing
Digital marketing for RIAs has been unsuccessful for three major reasons. First, most firms have high minimum account sizes, so they literally throw away leads on people who don’t qualify for their services. It’s awkward, expensive and frustrating for everyone. Secondly, digital responders may want local services, but the advisors don’t have a convenient office. Or clients expect more digital capabilities and the RIA’s model is traditional. It’s easy to mismatch.
Lastly, most RIAs can’t afford the expertise and advertising budgets required to build and sustain a client acquisition program.
Ric is a marketing genius and has more firepower on his team than most, but his radio, public TV and seminar strategies are old school. In the new world of FE/E, I can imagine the RIA having more segmented messaging to broaden beyond the pre-retirees and retirees it serves today, and that new tactics with social media, podcasts and TV and digital advertising will become more prominent.