Speaking to more than 5,000 attendees at Schwab IMPACT, Bernie Clark, executive vice president and head of Schwab Advisor Services™, pointed to the industry’s trajectory of growth over the past decade and underscored the critical importance of independent RIAs in helping lead investors out of the depths of the financial crisis.
“When clients didn’t know what to do, you provided a path,” said Clark. “You not only saw clients through some of the scariest financial times in this country’s recent history, you were a refuge when trust was broken.”
According to the latest findings from Schwab’s Independent Advisor Outlook Study (IAOS), released today at IMPACT, during the last decade, over a third (39%) of independent advisors report that they have emphasized their fiduciary duty, while maintaining transparency with their clients (72%).
“When clients were skeptical, you gave them confidence . . . when the pendulum swings, in either direction, your work matters . . . at a fundamental and a human level,” said Clark.
“Fiduciary means something. You have demonstrated that for years, and there is no doubt you continue to set the standard for advice in the industry.”
According to IAOS, the global financial crisis also affected advisors’ firms in several other ways, including changes in the use of technology (61%) and investment products (48%) and the frequency with which they communicate with clients (41%). On the other hand, most advisors report maintaining pricing (78%) and staying the course with respect to their investment philosophy (71%) over the past decade.
Industry success brings competition
The growth and maturity of the independent advisor industry has brought new levels of competition among independent firms. According to IAOS, two-thirds of independent advisors say differentiation is essential.
A majority of independent advisors feel that, when compared with wirehouse advisors, they are differentiated when it comes to acting in a client’s best interest (95%), understanding a client’s specific needs (84%), and understanding and supporting a client’s entire financial life (83%).
Among the ways in which RIAs say they differentiate from other independent advisors are client service and understanding clients’ unique needs. In each case, two in three advisors feel there is differentiation.
There is also notable competition when attracting and retaining talent. In the past five years, a third of advisors say their firm has hired someone directly from another RIA firm.
One in five advisors say someone in the firm has left to work at another RIA firm.
When competing for talent, compensation is seen as the most important factor for attracting (61%) and retaining (53%), followed by clear advancement opportunities (31% attracting and retaining), and flexible scheduling (27% attracting; 31% retaining).
Market expectations and client portfolios
Most advisors (70%) expect the S&P 500 will continue to go up the next six months, but this expectation is tempered by real concern about an eventual downturn.
Seven in ten advisors (71%) report that they are somewhat or very concerned about the possibility of a downturn.
Clients are mirroring this concern: eight in ten clients (82%) worry about the possibility of a downturn and four in five advisors have had to reassure at least some of their clients in the past six months.
Among factors perceived by advisors as having a negative impact on the markets over both the short and long term are tariffs on imported goods, followed by disputes over trade policies and the rising interest rate environment.
Looking ahead: Tapping into trends
Firms are turning to their next-generation advisors for insights in several areas, including technology, marketing, and firm culture.
Forty-two percent of respondents report that young advisors are most likely to advocate for using new technologies within firms, followed by operations staff (39%), client-facing staff (30%), and older advisors/employees (28%).
