Fraying investor nerves and an aging advisor population are an explosive mix even if the market, economy and election cooperate. Assets are flowing. Make sure you’re prepared.
Every advisor in the business today has a career glide path to anticipate. For most, that means retirement is about a decade away. That means every year looms larger than ever.
If you want to make sure every year you have left adds up to a satisfying outcome, you’re going to want to make time soon to review every aspect of your practice.
We want to help. Our inaugural RIA Redbook collects all the processes, partners and professional benchmarking tools needed to diagnose your operation and fill any strategic holes.
(And if you’re reading this and want to help other advisors thrive, there’s still time to introduce yourselves to us and tell you what you do.)
The career clock is ticking faster
Now that we’re no longer counting the anniversaries of the 2008 crash, it’s time to stop revisiting past traumas once and for all and look toward the future.
Big firms failed. Fundamental assumptions about how the market works bent. And a lot of promising careers swung into a deeply reactive posture.
If you’ve spent the last decade glancing over your shoulder, you’re a decade closer to retirement now. Stalled long-term plans need to get moving now or they’ll never happen.
Part of that proposition means locking down your exit. That might mean selling your firm, it might mean finding a successor who can step up as you start stepping out.
And the best scenario might require scaling up to reach critical mass. Pure AUM is going to get cheaper and cheaper in the next decade as your peers retire, but proprietary processes will always deserve a premium price.
The more assets you can amass now and the more efficiencies you know how to unlock, the better your position will be at the end of the day. That’s what the RIA Redbook is all about.
Big firms like Wells Fargo are already adjusting their retirement payouts for advisors ready to walk away. Maybe they’ll give you 1.5 years of production, including a loyalty bonus.
Raymond James is contemplating a sort of “advisor dating service” that matches exiting advisors to people looking to buy the book of business. Over the years I’ve heard the same idea come up over and over.
The upshot is always the same. Generic business as usual sells at generic prices. Your career becomes a commodity subject to the cruelties of raw supply and demand.
But a finely tuned machine is worth something extra when it’s time to sell, and in the meantime you’ll have an operating edge over your competitors.
If you want friends, it’s good to have something to offer a potential partner in exchange for synergies. And if you simply want to crush your rivals, you can do that too.
Maybe you’re planning more than a decade ahead. That’s all right. Even so, recognize that most of the people in the landscape will be headed from the exit by 2030 if they aren’t already long gone.
Do you want to do amazing things in the time you have left, or simply hold on to the bitter end?
The shakeout is coming
And every year like 2019 accelerates the exit for a lot of people. It hasn’t been a great year. Most clients are somewhere between anxious and aggravated at the volatility and sluggish trailing returns.
When the hassle is high and the rewards are grudging, we naturally start looking for escape routes. This might be part of the persistent “charm” of fantasies about a repeat 2008-style crash. After all, if the industry itself crumbles, the rest of us can theoretically get on with our lives.
I for one am tired of that defensive and defeatist point of view. Maybe it will feel good when the industry stops, but success feels even better.
A lot of clients are still looking for success. Match them with an advisor who simply wants to get through the coming decade and they aren’t going to be happy. They’re going to be here after that advisor is gone.
And they’re going to need help from someone, whether that’s a robot platform operating on somebody’s proprietary expertise or an up-and-coming advisor with a more expansive outlook.
Furthermore, a lot of today’s key clients are not going to be around in a decade anyway. The generational wealth transfer is still underway. AUM is shifting down the generational ladder.
Even if your clients are happy with business as usual, their kids who will inherit have a much longer time horizon and probably bigger ambitions.
They definitely aren’t going to be satisfied with a quarterly mailing and an office meeting. They want high-tech delivery, on-demand data, impact investing, life planning.
You might not want to deal with any of that. That’s all right. The RIA Redbook doesn’t have to be for you. It’s your career, your comfort zone and your life to live.
But if you’re reaching for more than mere survival, I think we can have a lot of fun in the years to come. There are empires to be won, new business models to try, whole markets to unlock.
And there are whole new generations coming eager to absorb the best you have to give them. Remember, there are more advisors above age 70 than below age 30 now. The kids are coming but there’s going to be a big talent gap for years to come.
You can pick and train your successor. You can build a firm worth passing on intact instead of being broken up for AUM. You can leave something enduring behind.
All you need to do is apply what’s in the RIA Redbook. You don’t even have to be in an RIA structure, although it definitely helps. Regardless of your certs, compensation model or area of expertise, there’s something here for you.
The industry is changing. Who knows where compensation models go beyond 2020?
Granted, next year may be quiet and comfortable. Robo competition may recede. The market may cooperate with everyone. The election will be a relaxing experience.
Savage price pressure in the asset management space may not spill over into consolidation across the industry, taking brokerage firms and wirehouses alike down for the ride.
But even if everything goes right in 2020, we then have to look toward 2021 and then 2022. Before we know it, it will be retirement time after all.
Let’s make the coming decade as exciting as we can. Let’s leave something amazing when it’s time to go.
And if you want to share what you know with your fellow advisors, maybe you want to not only read the RIA Redbook but play a role.