“The biggest question firms have is what they should prepare for next,” Salvi said, “and the answer to that depends on where a firm is now.”
Firms have to be fully focused on their ideal client when attracting new business, and “the same is true for acquiring new talent,” she added. “Firms have to be intentional about their talent acquisition strategy.
The number of advisors moving from one firm to another is increasing. Five years ago, 32% of firms were hiring from rivals and now 42% are hiring from each other, with the percentage going up a little each year. To help increase the number of new employees available for hire, Schwab has programs in place that promote the profession to college, and even high school, students.
The study showed that succession planning still is an area of weakness among advisors. Succession planning ranked ninth on the list of RIA priorities.
“I would love to see that number rise higher in the ranking because it is something advisors should think about every year,” Salvi said. “RIAs often wait for succession planning to be event-driven. Instead they should be thinking about where they want to be three years and five years from now. Doing nothing is a strategy but it does not give you as many options. Planning brings a much wider range of options.”
As firms grow larger, decision making is spread out and not confined to the firm founders. Ninety percent of firms with $100 million in AUM are led by the founders, but more than half of firms (52%) with at least $1 billion in AUM said decision making is spread out. The rest of the firms fall along that continuum. The team approach prompts more people to think as leaders and sets up a succession model. Ninety-two percent of firms are considering internal succession, the benchmark study said.
Marketing has been top-of-mind for advisors for several years: Advisors want to market themselves and they want to do it well. Again, the key, according to Salvi, is strictly defining who the ideal client is.
“For instance, advisors ask me if they should be on Twitter. I tell them it depends on whether that is where their ideal client will find them. If not, then it is a waste of resources, she said. In looking for the idea client, “one advisor told me recently the firm turned away a $20 million client because the firm could not provide the experience the client wanted. That takes bravery,” Salvi said.
In line with that thinking, she said advisors should add those services that make their businesses more compelling to their clients, not just add services for the sake of adding them. In each case that the study looked at, more advisors are enhancing their offerings. For instance, five years ago 58% of advisors were providing family education; in 2018 that percentage rose to 72%. Five years ago, 26% of advisors offered lifestyle management; last year 32% offered it.
“Overall, growth in the industry remains strong, revenues continue to climb, and RIAs are hiring more talent,” Salvi said.