To make that effort more profitable, firm leaders “can take a closer look at [clients’] household data to rethink offerings and pricing based on a segmentation strategy,” Sekhar said.
Firms looking for internal growth shouldn’t discount the advantages of outsourcing services that they can’t efficiently replicate, Fidelity said.
“Advisors are no longer just stock pickers. They are continuously pressed to offer more value to investors, whether that be tax planning, philanthropic planning, or general financial wellness,” Sekhar added. “This is a massive undertaking for advisors, and it’s impossible to do it all and to do it all well.”
One thing that can help is outsourcing things like investment management. “This allows advisors to work at the top of their license and focus on the most impactful and valuable work for clients,” he explained.
The survey’s respondents said their firms expect to increase the outsourcing of investment management and portfolio construction in the coming years, using more model portfolios and managed accounts.
“While more than half of firms are using an investment outsourcing product, irrespective of their size, there’s still room for greater adoption that could lead to more time saving for growth-focused priorities,” Fidelity advised in the survey. “RIA firm leaders should evaluate offerings across their business to determine areas with the most growth opportunity.”
The growth of RIA firms was also affected by the increasing frequency of fee discounts. After a brief decline in 2021, the size and frequency of fee discounting increased in 2022. Seventy percent of firms with less than $1 billion in assets and 89% of firms with more than $1 billion said they offered discounts. On the other hand, fee schedules remained flat, which further hurt growth and profitability. Firm leaders were advised by Fidelity to review their policies for discounting.
“It’s important for firm leaders to continue prioritizing ways to enhance their business model, especially during times of market uncertainty,” Sekhar said. These actions should include “analyzing their books of business and staffing models, so they can focus on their growth mindset, deepening client relationships, and standing out amongst their peers.”