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How Will Enterprise RIAs Continue to Differentiate?

Steve Levis June 24, 2021

The registered investment advisor (RIA) channel has seen strong growth over the past decade. Financial professionals across the industry are tempted with the allure of independence as they weigh the tradeoffs between flexibility and support. This movement to independence has equated to headcount growth within the RIA channel over the last several years.

According to Cerulli, in 2009, there were 45,221 advisors working in RIA firms, collectively managing $2 trillion in assets. Since then, the RIA channels have ballooned to 64,743 advisors managing nearly $6 trillion.1

Despite the rapid growth, however, enterprise RIAs still need to prioritize how that trend endures. How can the business remain present and relevant in the eyes, hearts, and minds of their clients?

How RIAs Evolved with Clients’ Needs

The RIA model has been well-positioned to compete with its broker-dealer and other competitor counterparts, mainly because they have been willing to adapt. Whether it’s growing their planning business, investing in digital, or enhancing the client experience, the RIAs of today are known to do the following:

  • RIAs spend the majority—55 percent—of their time on client-facing activities, with remaining time spent across administrative tasks, investment management, and training and professional development. 1
  • On average, more than half (53 percent) of RIAs’ clients received comprehensive planning advice in 2020, which grew 33 percent from five years prior. By 2022, RIAs plan to increase this segment of their client base to nearly 60 percent.1

Size and Scale Do Matter

Within this growing market, enterprise RIAs have key advantages in a few ways. Generally, an enterprise RIA is representative of a large firm with multiple locations and advisors’ clients belong to the firm.

Because of their size and scale, enterprise RIAs have the budget to focus on evolving their business to meet client expectations. This pricing power gives them an advantage as technology, staffing, and service needs rise, and the costs of remaining competitive subsequently increase.1

The big question enterprise RIAs are asking themselves is how to invest in the business to best ensure differentiation in the years to come. With my experience coaching large financial organizations to adopt planning, I have a few ideas to share on where investment is most impactful.

Prioritize the Client Service Model

The client experience is a top technology investment priority. There now exists a software solution for nearly every aspect of financial services to the point where tech stacks are growing at a rapid pace. But fintech does allow you to scale your efforts—especially in the face of spending your time where it is most profitable to do so.

Providing the client with a seamless digital experience is now table stakes. For firms already using financial planning technology, they are seeing the benefits of convenient client-led journeys and the personalization of advice delivery. Interactive planning can also keep client engagement and retention high, as well as efficiency. After all, why create a plan with five different scenarios—none of which the client would actually implement. By collaboratively co-planning with the client, you can create a plan that they can commit to and take action to improve their financial situation.

These firms likely also employ specialized staff (compliance, marketing, research) to help with firm operations. Scaling the administration and automation of outside tasks helps free up advisor talent for where they can add the most value: client-facing activities.

Expand Planning Knowledge

What started as the essential or “core services” when performing financial planning, has now broadened to include more niche categories.

To effectively perform holistic financial planning, advisors need to offer more than just conventional services of retirement planning, tax management, and investment planning. Consider debt management and credit support, healthcare planning, at times even being a mediator between family members. These are just a few examples of the expanded roles that the advisor/firm are undertaking to create a comprehensive service.

To deliver increased services and client support, many firms are encouraging professional development opportunities for their talent. This not only helps to differentiate an advisor or a firm from competition, but it also increases client retention if you can find new ways to work together.

RIA firms may also take a team or ensemble approach to serve clients more holistically, allowing professionals to build and lend their expertise across the firm. Since clients are part of a firm—and not part of an individual advisor’s book—being served by a team may become the norm.

Measuring the Firm’s Operations and Profitability

For a firm to really stand out from the competition and accelerate its growth it has to be able to play to its strengths, while cutting or improving upon its weaknesses. Well-defined functional teams/departments and multiple layers of leadership lay the groundwork for operational efficiency.

Those investing in their tech stack and integrations between systems—such as connecting your financial planning software and your CRM—may benefit from robust data. For example, can you quickly access which clients have a financial plan and which are profitable? Insights into the potential opportunities across the firm’s client base can be meaningful for growth. This is now achievable with software integrations and APIs.

If you can procure meaningful reports or dashboards that measure a firm’s vision it will not only breed better efficiency, but promote collaboration across a firm as well.

The Enterprise RIAs of the Future

For each RIA to continue to differentiate their firm and their services moving forward, they must not only adapt to these growing trends, but continue the evolution. For other ideas, read our eBook The Enterprise of the Future: Meeting Financial Professionals and Clients on Their Own Terms.

Source:

1 The Cerulli Report, “U.S. RIA Marketplace 2020: Exploring Drivers of Change,” Cerulli Associates, October 2020.

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

About the Author

Steve Levis, CFP®, SVP, Financial Planning, leads the Practice Management Team within eMoney’s Financial Planning Group. Steve helps new and existing firms succeed with the eMoney platform by leveraging its capabilities to the greatest extent within their practices. During his eMoney career, Steve has led the Customer Service, Financial Planning, Tech Support and Training teams at various times, in addition to countless hours assisting advisors and their teams.

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Welcome to
Heart of Advice

a new source of expert insights for
financial professionals.

Get Started

Tips specific to the eMoney platform can be found in
the eMoney
application, under Help, eMoney Advisor Blog.