Cerulli Sees Consolidated, High Tech Future

Helping to fuel the trend is the relative aging of financial advisers and the lack of succession planning and engagement of younger generations of advisers, notes Bing Waldert, a director at Cerulli. According to the December 2014 issue of “The Cerulli Edge – U.S. Edition,” forward-looking firms are already working to address the long-term implications of more rapid adviser retirements and what this could mean for the industry’s future business models.

The analysis also suggests third-party administrators (TPAs) and other providers may have success offering solutions and models for adviser consolidation and succession.

“Wealth management firms and asset managers with retail third-party distribution understand the risk associated with an aging advisory population and few solutions on the horizon,” Waldert says. “The next wave of consolidation is likely to happen at a far more local level, with large, well-run individual advisory practices becoming the beneficiaries of adviser retirements.”

The report suggests ground-level consolidation to “mega teams” is already beginning. Additionally, advisers can look to other distribution channels, which are further along the path to localized consolidation, to provide a model for how the retirement advice and wealth management industries could evolve.

“Within the [TPA] and structured settlement industries, owner-operators are beginning to sell their businesses as part of a succession plan, creating locally, regionally and even nationally dominant franchises,” Waldert explains. “These firms' centralized, shared services model provides a framework for future financial adviser consolidation.” 

The research also examines technology advances and distribution efficiencies that are leading to change in the advisory industry—potentially favoring larger teams with more to spend on internal or external tech support. However, investments in new technology do not always meet expectations, Cerulli notes. The problem for many advisers and providers remains determining how tablets, smartphones, and other digital tools can be integrated with customer relationship management (CRM) systems for maximum effect.

In addition, many firms struggle with the ability to integrate a variety of external data sources with their internal legacy systems and subsequently deliver actionable output to their teams. Cerulli’s report urges firms to take a deeper look at how to make these systems a strategic tool for business planning and identification of sales opportunities.

Cerulli also suggests a robust future for advisory firms will require a more diverse annuity product set in addition to efficient digital systems. Relationships with third-party administrators and other service providers with succession planning support will also help advisers transition their business to the next generation of leaders, Cerulli concludes.

Information on how to obtain Cerulli reports is available here.