Almost every financial advisor in a recent survey of RIAs believes the industry is poised to grow—albeit modestly.
Eighty-two percent of advisors surveyed in Schwab’s 13th annual Independent Advisor Outlook Study, which was released today to coincide with the opening of the custodian’s 2020 virtual IMPACT conference, expect to end 2020 with some level of growth. The surveyed advisors expected average asset growth of 11%.
Indeed, advisors have generally provided a positive view of their business prospects in the annual Independent Advisor Outlook studies, said Bernie Clark, executive vice president and head of Schwab Advisor Services, in a pre-conference media roundtable last week that involved three RIA leaders whose firms custody with Schwab.
“The optimism almost from Day One has always been strong,” he said. “The last decade has been a phenomenal period of growth for independent advisors … even with the Covid-19 challenges, they remain optimistic.”
More than half of advisors (58%) believe that RIAs will grow at a slow, steady rate moving forward, while another 33% of respondents believe the industry has not yet fully matured and should continue to grow faster than the market. Only 9% of surveyed advisors think that growth within the RIA space would remain flat or decline.
But according to many survey participants, expectations for growth have been dialed back since the beginning of the year, likely due to Covid-19. A plurality of the survey (42%) reported their growth expectations have declined since January, while 20% said they now expect their growth to exceed their January expectations. Large firms with more than $500 million AUM were more likely to dial back their growth expectations than smaller firms.
Clark said some growth is to be expected, simply because there are more assets outside of the RIA space than inside of it, an idea echoed in the call by Dave Hill, founder and managing director of Sonata Capital Group in Seattle.
“There’s a considerable amount of wealth that is not within the RIA space,” said Hill. “There’s so much opportunity to capture more of that and for us to work with more clients. The world is becoming so much more complex, there’s so much information—especially investment information—that’s now available. I think we may find that more and more clients we work with are having difficulty digesting all of that information and putting it into a plan that works for them.”
Most of this anticipated growth (93%) is expected to be organic, with 50% coming from new clients and 43% in the form of new assets from existing clients, according to the respondents.
Growth will be driven by advisor and consumer preference for the independent model, according to the surveyed advisors.
Advisors see their chief barriers to growth being new forms of competition, the long-term impacts of Covid-19 and the challenge of differentiating from their competitors.
“In all of the competitive threats from Robinhood, robo-advisors and the like, the personal relationship is missing, as it’s so often missing in our current society, especially right now with the Covid-19 pandemic,” said Priscilla Gilbert, president and founder of CenterPoint Financial in Montpelier, Vt. “I’m optimistic that word will spread that there is a better option for receiving your financial services than institutional brokers and technology.”
Gilbert also cited keeping up with technology, compliance and cybersecurity demands as “enormous challenges” facing independent advisors in the waning months of 2020.