Sometimes I feel like Chicken Little, crying, “The sky is falling!” to whomever will listen. I realize that most advisors don’t see the evolving advice landscape or how the consumer is changing, but the signs are there, if you are looking.

Look at the headlines in the financial press. Almost daily I read of a major registered investment adviser (RIA) consolidator or private equity firm buying a large advisory firm. The press usually reports these transactions as a deep-pocketed acquiring firm seeking out a leading firm in a new metropolitan area and providing liquidity to the sellers. I always read into the story with the idea of economies of scale and deeper resources around technology, processes, and marketing. The mega-firms are growing bigger and bigger.

Look deeper and you see the digital providers growing too. For example, these headlines caught my eye:

The independent advisor in the middle

In a 2019 “Cerulli Edge” report, Cerulli predicted that by 2030 the wealth management business will be comprised of three segments: The mega teams, digital providers, and lifestyle practices (what I call independent advisors). With that in mind, go back and re-read the first two paragraphs of this blog (including the articles) and tell me what you see.

I will tell you what I see — mega teams (and firms) forming at an increased rate alongside a huge demand for planners to fill the digital provider's rapidly growing business. The squeeze is coming, with the large mega teams catering (and marketing) to the high net worth (HNW) marketplace. The independent firms will not be able to compete head to head as they will be out-resourced by the larger, well-capitalized, and process-driven firms. Those large firms will market their planning, knowledge, and access to top professionals within their firms.

On the other side of the squeeze are the fast-growing digital providers who will use, alongside other things, AI to anticipate their clients’ needs. They will offer generalist financial planning, 24/7 access to their technology, and low-cost proprietary investment implementation to the mass market investor. As you see above, thousands of financial planners, many of them CFPs, will be more than happy to discuss any questions and address any needs.

Not my clients

I can hear advisor responses:

  • “We offer real planning.” So do they.
  • “We have great relationships with our clients.” Your aging book is personality-driven. Can it succeed without you? What about the next generation?
  • “But our investment process is proven and solid.” And it is a commodity.
  • “My clients will stay.” Will they continue to pay a premium price for a single resource?
  • “Seriously, my clients will stay.” Are you going to reduce your compensation down to 30 basis points?¹

Independent firms or lifestyle firms won’t be able to “out-resource” the mega teams and can’t compete with the scale and volume of the lower-priced competitors.  

Innovate or get out of the business

My last blog post, “Are You Netflix or Blockbuster?” hit a chord with many of our readers. I wrote about being innovative, listening to your clients, and “hyper-focusing” on the client experience. I also talked about specialization, partnerships, and integration — ways to set your firm apart while creating scale and efficiencies.

The signs are out there. The competition is heading your way. What are you going to do about it?

¹ One basis point is equal to 1/100th of 1%, or 0.01%


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