Three Pivotal Trends Impacting Growth

RIAs should focus on expanding client services, adopting a team-based approach, and meeting the needs of Gen X.


Illustration by RIA Intel

The wealth management industry appears to be fixated on the first decline in mergers and acquisitions activity in more than a decade, capturing the attention of industry experts eager to understand the factors behind this shift. DeVoe & Company’s report highlights that the main factors impacting a decrease in volume included high interest rates, extended due-diligence efforts, evolving deal structures, and an increased emphasis on scrutinizing valuations.

The decline has certainly captured its share of headlines, but astute observers recognize that the headline noise risks overshadowing several critical trends that will impact RIAs’ growth trajectories this year and beyond. Fee compression, the relentless pursuit of an elevated client experience, and the ongoing “great wealth transfer” from the baby boomer generation to their heirs have long been on the industry’s radar.

The expansion of client services has emerged as a pivotal factor shaping RIA growth. As highlighted in research from Tiburon Strategic Advisors, firms continue to broaden the range of services they offer, encompassing tax, estate, insurance, lending, and cash management. This diversification reflects a burgeoning demand among clients for a more comprehensive and holistic offering in exchange for the industry-standard 1 percent fee. To effectively cater to this appetite for new services and accelerate growth, firms must either create and hire for these specialized roles, a process that can be both arduous and costly, or strategically partner with firms that already possess these capabilities to serve as an extension of their practice.

Adding these services and successfully delivering them to clients requires a careful balance between meeting client expectations and optimizing operational efficiencies — underscoring the significance of RIAs needing to adapt to drive sustainable growth in a competitive market.

RIAs and their advisors are increasingly crunched for time. Advisors often juggle a multitude of responsibilities, from lead generation and prospecting to investment management and compliance adherence, necessitating a team-based approach to client service and satisfaction. Time is becoming an increasingly scarce commodity, and the old model of relying on a single advisor to be the sole point of contact is no longer sufficient to meet the needs of discerning wealthy clients.

Client satisfaction and retention has always been top of mind for the industry. However, the recent trend toward eliminating single points of failure means embracing a broader team of experts to meet clients’ increasingly diverse and nuanced demands. By implementing a multidisciplinary support team comprising both generalists and specialists, RIAs ensure they are adequately equipped to deliver highly responsive “one-stop-shop” convenience, transcending the level of service that clients historically required.

When it comes to the ongoing transfer of wealth from baby boomers to their heirs, headlines would have you believe that attracting millennials and Generation Z are required for a successful business today. However, over the next decade, Generation X will be the generation with the largest amount of growth in their wealth.

Gen X workers are currently experiencing their prime earnings years and are amassing their own wealth, in addition to any anticipated inheritance. Advisors who turn a blind eye to this critical demographic risk stunting their growth and missing out on an estimated $84.5 trillion in total investable assets by 2045. Gen Xers are navigating complex financial responsibilities — with many concurrently finding themselves having to plan for their children’s college tuition and their aging parents’ care.

This multifaceted challenge for Gen Xers presents financial advisors with a unique opportunity to serve them. Focusing solely on millennials or Gen Z might lead to missing out on a vital group that is set to inherit and accumulate significant wealth. Advisors who effectively meet the needs of Gen X, while keeping an eye on the larger picture of intergenerational wealth transfer, can tap into a major upcoming wave of opportunity.

RIA growth in the coming years demands a strategic understanding of the trends that are driving dynamic change. The old school way of meeting with a client once a year and offering investment management services simply won’t suffice moving forward.

As the financial advice industry evolves more rapidly than ever before, RIAs that fail to adapt to the changing demographics of their client base will be left behind. Firms that have existing in-house capabilities to meet these burgeoning demands or are otherwise willing to join larger entities that do will thrive, as adapting to these trends will be requisite for sustained growth and future success.

Mike Capelle is co-founder and co–chief executive officer of Modern Wealth Management, a Monterey, California–based RIA that focuses on strategic acquisitions of high-growth RIAs across the country. In March, the company bought New York–based Beltz Ianni & Associates, a corporate retirement planning and individual wealth management firm, bringing its total assets under management to more than $3 billion just one year after its founding.

Opinion pieces represent the views of their authors and do not necessarily reflect the views of RIA Intel.

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