Optimistic On Growth, Wary Over Competition

Changing expectations have not decreased optimism among RIAs, according to the 14th semiannual “Independent Advisor Outlook Study” from Schwab Advisor Services. The majority of RIAs (70%) reached for the study reported feeling “very optimistic” about growth opportunities in the next five years.  

The top two focus areas for independent firms preparing for growth are differentiating in the market (17%) and adopting new technologies (16%).

When ranking their strongest current competition, 74% of independent advisers pointed to other regional RIAs. Forty-six percent cited competition from wirehouses and 43% said they face competition most strongly from broker/dealers.

A majority (71%) of RIAs believe there will be increased competition for new assets in the next five years. While the number of RIAs believing their strongest competition will come from other RIAs falls to 66% looking beyond 2018, greater competition is expected mostly from the development of national RIAs (51% compared to 34% today) and online investment advisers (45% compared to 12% today).

Close to half of RIAs (44%) expect regulatory changes to make other advisory models look more like independent firms. The same number believes the next generation of clients will seek advice from multiple advisers rather than consolidate assets with one adviser.

Another telling figure: Almost two-thirds of advisers (60%) believe the need to differentiate from the competition is greater than ever.

When it comes to planning future business practices, slightly more than one in three (34%) advisers would dedicate additional technology resources to creating a paperless environment using document management and portal solutions. An additional 27% would migrate key technologies to the cloud to eliminate onsite management.  

Five years out, advisers expect the top investment needs for clients will include providing access to low-cost index funds including mutual funds and ETFs (55%), as well as providing investments with guaranteed minimum income (50%).

The survey also addresses RIAs’ expectations as younger generations of clients enter the retirement planning space. One telling figure in this area shows 77% of advisers strongly agree that adviser independence will be more important in the future to investors than it is today.  

Additional study findings and information on methodology available here.