A Legacy Strategy RIAs Can Steal From Banks

People want a one-stop shop for investments, banking and other financial services. RIAs delivering that will differentiate themselves, according to Cerulli Associates.

(RIAIntel Illustration / Bigstock)

(RIAIntel Illustration / Bigstock)

Much has been written about the consolidation or aggregation of advisory firms. Private equity’s appetite for RIAs seems to be insatiable and Focus Financial Partners CEO Rudy Adolf recently told RIA Intel “if you don’t grow, you die.”

But it might behoove wealth managers to focus on another form of consolidation.

Almost half of all wealthy clients (49%) say they would prefer a single financial institution to serve most of their needs, including investment management, financial planning and banking. However, only one third of clients interested in a one-stop shop say they are engaging a company that way, according to a report by Cerulli Associates.

Only 22% of respondents indicated there was any negative impact of consolidating various accounts and services with one company.

That gap between interest and action is an opportunity for advisors to build relationships with clients, making them stickier, while capturing more wallet share.

Large banks with both consumer and wealth management businesses have long cross-offered those services to their clients. Now, RIAs, and dual-registered firms, are finding ways to do the same.

In the spring, Carson Group, the Omaha, Neb.-based wealth manager with partners in 108 offices and $10.7 billion in assets, announced plans to partner with a company called Galileo to offer FDIC-insured cash accounts akin to traditional checking and savings accounts.

“The future is delivering more value to end consumers – consumer banking is yet another value-add for the client,” said Andrew Rogers, advisor solutions manager at Carson Group.

Not surprisingly, younger clients, coveted by wealth managers because they have many more years of earning (and fee-paying) ahead of them, are more interested in the simplicity and convenience of leaning on a single financial services company.

For that reason, wealth managers should consider a move like Carson’s sooner rather than later. Consumer banking products are already near table stakes for companies offering low-cost investment solutions that younger clients tend to gravitate toward, according to Cerulli. Betterment, Wealthfront and SoFi all offer cash accounts.

Still, few RIAs are following in Carson’s footsteps.

“While the idea of consolidating finances is appealing, the steps needed to get there are not. Investors want the outcome without the laborious process of getting there,” Scott Smith, director of advice relationships at Cerulli, wrote in the report.

Companies that are serious about their advisors overseeing more wallet share can’t provide simple account aggregation and think they checked the box. The path to opening new accounts and managing them needs to be fluid and free of friction.

“Using technology to assist investors with asset consolidation is expensive, but this type of high-touch service can create client advocates more likely to promote a firm among their peers.”

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