The RIA Industry vs Financial Advisors

RIAs Are Trending


We can see now that 2021 was a very good year for so-called breakaway financial advisors — those who leave Wall Street wirehouses like Merrill Lynch and Morgan Stanley and flock to registered investment advisors, where they stand to earn a greater share of their revenue and enjoy greater autonomy than they would working at a big bank.

Wall Street was aware of this trend for years, pointing to the fact that the Big Four wirehouses, which also include Wells Fargo Advisors and UBS, have the wealthiest clients and the financial advisors who generate the greatest amount of revenue in the industry.

As the financial advice industry attempts to emerge from two years of Covid-19 and return to the office, the numbers on where advisors are choosing to work show there’s little room for doubt that the wirehouses are losing talent.



Wall Street firms are pouring money into technology — think Merrill Edge — and acquisitions— see Morgan Stanley’s recent purchase of ETrade. But it’s the RIAs that are winning the battle for experienced financial advisors. And that doesn’t seem likely to change any time soon.


RIAs Make Gains


According to InvestmentNews Research, the RIA channel saw a net gain of 1,530 financial advisors in 2021, while the wirehouses had a net loss of 2,065. Of course, not all wirehouse advisors jump to an RIA; some retire and hand off their book of clients to the firm, often for a handsome fee. The RIA channel also boosts its numbers by scooping up advisors from independent broker-dealers and regional firms, although the target for many RIAs is the wirehouse advisors with the biggest production.

RIAs also have the wind at their backs in the fight for financial advisor talent. Last year’s RIA net gain was 69.4% more than in 2016, when RIAs had a net gain of 903 advisors, according to Research.

And the RIA industry is beginning to look a lot like Wall Street, making it even more attractive and familiar to financial advisors leaving the big firms. For instance, private equity money has flooded the RIA industry, increasing the potential valuation of an RIA with $1 billion or more in assets under management.


Financial Advice Industry on Public Markets


The public markets are another reason why RIAs are attracting financial advisors.

Dynasty Financial Partners, an early proponent and gateway tool of the breakaway partner model, filed for an IPO in January, reporting 47% year-over-year growth in fee-based revenue through September, according to a filing with the Securities and Exchange Commission. It’s seeking to raise $100 million.

Also in September, two RIAs and a special purpose acquisition company said they were joining forces to create a new company that will be listed on Nasdaq, Alvarium Tiedemann Holdings. They have aggressive growth targets for assets and earnings. The new enterprise expects to have a public value of almost $1.4 billion.



More of such listings and deals will come in the near future to the RIA industry. It’s a hot ticket in the wider financial advice industry, which is the new normal for RIAs.


Major Challenges for Advisors


After two years of the Pandemic, advisors are facing major challenges bringing new clients in the door and are struggling to focus the necessary time and effort on building the key components of their business.

Three out of four advisors have problems with goal management as they seek to grow, with many of them looking to increase their offerings to clients, according to a recent study by the turnkey asset management platform AssetMark Inc.

The study of 750 wealth managers found the most common challenges advisors face today are scaling their business for growth and spending the time needed on business-building activities, like financial planning with clients, practice management and new business development.


The Action Plan


“To achieve scale and growth, advisors need to prioritize their limited time,” said Matt Matrisian, chief channel officer at AssetMark. “Investment management can be very time-consuming and doesn’t generate the same value as spending time on clients.” 

In fact, more than nine in 10 advisors who have outsourced at least some aspects of their business reported their total assets have grown as a result. Ninety-five percent of respondents also said the change meant they had a better work-life balance, according to AssetMark’s recent Impact of Outsourcing study.

While outsourcing can save crucial time, many advisors are still concerned about paying higher fees. The top reasons for not outsourcing among the advisors surveyed included higher fees (65%), concerns about a loss of control (48%) and the perceived inability to customize solutions for unique customer situations (43%).


If outsourcing isn’t an option, there are other approaches common among top-performing advisors. According to a 2021 study by Morgan Stanley & Co., fostering diversity and keeping up with the latest technology advancements were critical to next-generation growth. The top planning teams of the future will demand advanced tools and resources as they shift their client service models, and a focus on diversity will help attract and retain both talent and next-generation clients, according to the report.

So, financial advisors have different options to face new challenges in the post-Covid world and hopefully, the way they will do that results in improved efficiency.

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