Now a decade in the past, the global financial crisis significantly changed how independent advisors approach and do business with their clients – but it did not change their ability to charge fees for their services.
According to Schwab’s latest Independent Advisor Outlook Study, released Monday at the Schwab IMPACT 2018 conference in Washington, D.C., more than three-quarters of 783 advisors surveyed have been able to maintain their pricing in the decade since the financial crisis.
“Advisors came to recognize quickly in 2008 and 2009 that difficult markets were an opportunity to serve more clients, get in front of them and plan for them with longer-term perspectives,” said Bernie Clark, head of Schwab Advisor Services, at a Monday media panel discussion at the Schwab IMPACT conference. “That served them well, they tripled in their size and halved their competition in the decade since the crisis.”
Yet the crisis did prompt advisors to change the way they operate within client relationships. Over the past decade, more than one-third of advisors, 39 percent, have emphasized their fiduciary duty to clients, and an even greater number, 72 percent, have strived to maintain a higher level of transparency.
Schwab also asked about RIA’s experiences with attracting new talent over the last five years, finding that there is a significant amount of attrition occurring within the independent advisor channel. One-in-three RIAs say their firm has hired someone directly from another RIA, and one-in-five report losing an employee to another RIA.
“If you’re looking for someone with the qualifications we require for our advisors, there’s an enormous amount of competition for those limited resources,” said Steven Elwell, partner at Amherst, N.Y.-based Level Financial Advisors, during the panel discussion.
Compensation is seen as the most important factor for attracting and retaining talent among RIAs, followed by advancement opportunities and flexible scheduling—Elwell pointed out that he started at Level as an intern 12 years ago, and the opportunity to rise to the level or partner was key to keeping him in the fold.
The financial crisis of 2008 also touched off more competition in the industry, according to Schwab, which has led independent advisors to emphasize differentiation. The most commonly cited line of differentiation from traditional wirehouse financial services is an RIA’s fiduciary duty to act in a client’s best interest, identified by 95 percent of the survey participants. Respondents also pointed to their ability to have a deeper understanding of client needs, and the ability to understand a client’s entire financial life in a holistic manner as differentiating factors.
Large portions of advisors also told Schwab that the crisis impacted their use of technology, 61 percent, investment products, 48 percent, and the frequency of communications, 41 percent. Nevertheless, most advisors in the survey, 71 percent, stayed true to their investment philosophy in the 10years following the crisis.
April Bortscheller, vice president of operations for the Plymouth, Minn.-based Berger Financial Group, said that the crisis also changed the way her clients think about market volatility.