Independent financial advisors are beginning to mature as a channel of business, according to a recent study from San Francisco-based Schwab Advisor Services.
Nearly three-quarters of RIAs surveyed said that they now think of themselves as business owners rather than entrepreneurs, according to the 22nd semi-annual Schwab Independent Annual Advisor Outlook Study.
“When you get 75 percent of advisors saying ‘hey, I’m a business owner,’ it’s because the business has become so close and personal to them,” Bernie Clark, executive vice president for Charles Schwab & Co., said on Wednesday at the 2017 Schwab IMPACT conference in Chicago.. “These people enjoy serving their clients so much more than using their business merely as something that will benefit them. … This is part of their family.”
Rather than signaling a slowdown in innovation, respondents now view themselves as established competitors in the financial services, Clark said. As a result, he added, RIAs are more inwardly focused on growing and developing their practices into enterprises, large and small.
Advisors who identified themselves as business owners tended to be more focused on personal commitments to families and communities rather than developing their business as an asset. Ninety percent of the business owner respondents said that they do not plan to sell or transition their business until they’re ready to retire.
Overall, the survey’s respondents were convinced that future growth would come both from new and existing clients, with new clients accounting for a slightly larger percentage of new assets, 45 percent, than existing clients, 37 percent.
“As business owners, we see that they are focusing more on the organic growth of their businesses," Clark said. "[In other segments] firms are choosing to think more about consolidation. When they do that, they distract from that organic growth.”
Despite an eight-year bull market in equities, advisors are dealing with mixed emotions over the markets. Two-fifths of advisors believe the S&P 500 will decrease or maintain its current levels over the next six months. One-third of the respondents said that the current market environment is making it difficult to help clients achieve their goals.
Clients are becoming nervous as well, as 80 percent of Schwab’s respondents reported that they needed to reassure clients that they are on track to reach their financial objectives. Clark believes that this nervousness extends to individual retail investors as well, creating opportunities for advisors.
“We’re hopeful in the industry that people will get help in a downturn instead of just selling,” he said.