Over half of advisors think investment personalization will increase, especially among Millennial clients

Talent continues to be both a strategic opportunity and an operational challenge for firms

Continued growth lies ahead for the independent advice industry according to registered investment advisors (RIAs) surveyed in Schwab Advisor Services’ latest Independent Advisor Outlook Study (IAOS). Nearly all firms (93%) expect growth will continue over the next five years, with a projected uptick of 17% in terms of the average net new assets expected per year over this time.

Across the board, most advisors have a strategy in place to continue to grow at their current rate (43%) or faster (26%). The top reported growth driver is acquiring new clients (64%), and almost three in five advisors (57%) are looking to attract new clients who began investing in the past 18 months. They plan to do this via a combination of working with existing clients to reach the next generation, using technology more, recruiting younger advisors and offering new solutions and services.

Beyond adding new-to-firm clients, growth is also expected to come from building relationships with centers of influence and driving referrals (36%) and growing existing client relationships (34%).

“As we begin 2022, we reflect on the previous year when industry growth topped all-time highs across firms of every size,” said Jon Beatty, managing director and chief operating officer, Schwab Advisor Services. “We think the trajectory is only going to continue, and we are looking forward to working alongside advisors to help them chart and manage their growth, compete for new client assets, and build firms with a common purpose and strong culture.”

Growth levers: Not one size fits all

While firms across the study largely share a robust outlook on growth, the data shows that firms emphasize different levers to achieve it, including:

• Talent: Focusing on organizational structure, attracting and retaining talent, and anticipating skillsets needed for the future as they are essential to supporting growth.
• Sales and marketing: Making investments in sales and marketing to actively create strategies to meet target client needs.
• Client experience: Using target client personas to better meet client expectations, creating strategies to meet clients’ needs, and identifying specific client segments for expansion.

Getting personal: Understanding what investors want and delivering it at scale

More than half of advisors (52%) believe that investors are looking for added personalization within their investment portfolios over the next five years. Of those clients seeking personalization, advisors cite that Millennials will lead the way (38%), followed by Baby Boomers (26%), Gen X (22%), and then Gen Z (10%).

“Personalization is a growing part of every industry, and it is particularly important to investors. More people are asking questions about how, where, and why they invest, beyond the basic goal of wealth accumulation. Clients increasingly expect there to be an understanding of needs and values, and to have access to financial solutions that will align with them,” said Beatty. “The advisor/client value proposition has its foundation in a personalized understanding of the client, and the emergence of new tools and investment solutions to put values into action is opening a whole new opportunity for RIA firms.”

Advisors appear confident that they will be able to scale the delivery of personalized investment solutions: over half (53%) say this offering will be somewhat scalable, and almost a third (28%) think it will be very scalable. They will be looking to adapt by finding new ways of building and maintaining relationships with clients (59%), utilizing better tools or approaches to assess clients’ needs and values (56%), and providing education about investing to the whole family (51%).

Talent: Strategic and challenging priority

Overall, advisors at firms with two or more employees are confident that they can meet their clients’ current and future needs with their talent approach. The majority (92%) report their talent strategy reflects the needs of their current client base, and almost three-quarters (74%) say they are also hiring today to ensure they have the skillsets they need for tomorrow.

Two-thirds of firms (66%) have a clear talent strategy in place to help them grow, but even so, finding talent remains by far the greatest challenge. Almost two in five (37%) firms cite finding talent as a top challenge, more than three times other areas of talent management, including managing people (11%), ongoing training and development (9%), building a cohesive culture (9%) and knowing how to compensate and reward talent (9%).

As such, finding, developing, and retaining talent is one of the leading barriers for advisors’ optimistic outlook on overall firm growth (#2), sitting between balancing time and priorities (#1), and creating operational efficiency (#3).

Around half of firms (49%) focus their recruiting within the finance industry itself, but the other half are branching out into areas including sales, communications, and technology. Among the top five attributes they seek (in order of importance): work ethic, attention to detail, team player mentality, ability to communicate with clients in person, and commitment to the firm.

“We all have so many things constantly vying for our attention, not to mention so many options for managing our finances. That’s why the relationship between advisors and clients is so critical. By keeping the attention of clients and engaging with them, the relationship itself helps drive growth. And it is people who sit at the heart of these valuable relationships,” said Beatty.

About the Independent Advisor Outlook Study

The Independent Advisor Outlook Study (IAOS) is an online study conducted for Charles Schwab by Logica Research. Logica Research is neither affiliated with, nor employed by, Charles Schwab & Co., Inc.

The survey responses come from 723 independent investment advisors who custody assets with Schwab or TD Ameritrade Institutional, representing a total of $291B in assets under management (AUM). Participation is voluntary, participants are not incentivized, and the typical (median) survey length was 11 minutes. The study was conducted from October 12 through October 28, 2021.

Detailed findings can be found here.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

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Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support of Schwab.

Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. For informational purposes only.

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