Advisory industry outlook

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Having joined the financial industry in 1987, it’s been interesting to see how the advisory world has developed over the last few decades. While it’s easy to look back and take note of how the industry has changed, it’s important for advisors and investors to also look forward and be mindful of where things are headed. Below, we outline the trends and themes that we feel will shape the advisory business over the next 10 years.

  • Maturation of industry. Due to the organic growth within the industry, there will likely be a shift into larger, regional and super-regional, RIA firms.
  • Increasing attractiveness for “roll-up” firms.  As the baby boom generation of advisors begins to retire, there is concern over many who have no solid succession plan in place. For those who can begin planning in advance, more options are available and more are looking to have their firm acquired rather than walking away or handing the business over to a successor.
  • Investment firms and brokerage companies will see a bigger push toward investment management.  The commissioned base brokerage world that used to sell mutual funds, muni-bonds, etc. are seeing investors become unhappy with performance as bonds mature. The move toward a fee-based investment management format will be meaningful in several areas:
    • Cost effective
    • Easier to manage an individual book
    • Fixed income side– Investors have lived through a 30-year boom for bonds. Rates will likely start to rise again and the challenge will be how to generate income and total return in a rising rate environment.
  • More firms to outsource in-house services, such as compliance. With regulation increasing, it’s becoming challenging for a singular compliance employee at the firm to keep up. Given the dramatic changes in regulation over the last few years, outsourcing the service is a way to cover the bases and keep costs at a minimum.
  • RIA firms increasing margins by investing in technology. As fees continue to compress within businesses, more firms will gravitate toward using technology platforms such as CRM systems, portfolio re balancing systems, document management, and financial planning software.
  • Utilizing social media as a communication platform.With social media and technology growing at an accelerated rate, clients have a higher level of expectations regarding communication and how/when they can get a hold of their advisor.
    • Compliance regulations will likely be set sooner rather than later (next 2-3 years), guiding advisors on what they can/cannot do with social media websites and their use as a marketing communication tool.

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