Here is a bit of a summary of what we discussed.
The Obvious: What is the obvious driver for this breakaway movement?
We discuss some details around conflicts of interest, regulatory standards, and just the pains of dealing with so many factors related to multi-line (banking and investment management are examples of two lines) firms that do either one or all of the following:
- Manufacture & Distribute Financial Products
- Multiple business units which operate in jurisdictions covered by different regulators
- Or simply, different financial drivers for each unit in a multi-line firm
The Less Obvious (but clearly evident): Competitive Advantage
The traditional advantages with working at wirehouses have eroded with the custodians helping level the playing field.
Two additional factors give the edge to RIAs:
- Human talent – the most talented advisors with an entrepreneurial drive are most likely to leave
- Technology
- large community of fintech options
- no legacy tech to worry about
- newer tech tend to be constructed with interoperability in mind
The Aging Population: Creates an anchor for bigger firms and an opportunity for more flexible, entrepreneurial firms
- Competency Trap – biggest firms have built themselves a cash cow with older, wealthy clients they must sustain
- Myth of “NextGen” – Younger generations have never proven to be reliably “accept” their parent’s or even spouses advisors.
Certainly, with the marketplace favoring client choice and a steady flow of entrants into wealth to compete for client business or expand the existing professional wealth management market, this trend looks likely to continue.
I really want to thank Dave Schrohe for helping me get the initial ideas on this thread of “Going Independent” started. The video segments of this discussion will be serially on our YouTube channel and via LinkedIn over the coming weeks. We would love to hear your thoughts and reactions. Also if you have additional thoughts under this topic and would like to do an interview or piece, please let me know!
Roger | 917 302 0947 | roger.hu@wealthtransformed.com
