Displaying items by tag: advisors

Raymond James conducted its annual survey of retired financial advisors to figure out how happy they are and the factors behind their responses. A consistent lesson is that succession planning is essential to feeling content in retirement. 

Many advisors recommend getting immediately started with succession planning, even if it is many years down the road. An important step is to identify a successor who you believe can continue effectively serving your clients. 

Some steps in this process include surveying your network to identify potential candidates, conducting interviews, and spending time with them to gauge if they are the right fit. It can also be helpful to get input from your firm’s management team.

Once you’ve identified a successor, the next step is to inform your clients. In the survey, 74% of advisors mentioned that communicating with clients was important in preparing for retirement. While these conversations can be initially awkward and uncomfortable, they will ultimately deepen the client-advisor relationship and increase the odds of a successful transition for your clients.

The final step is getting mentally and psychologically prepared for retirement. This can mean planning the final stage of their career, whether it means an immediate exit, a transition period, or a consulting role. Retiring advisors have considerable experience and wisdom that they can still share with their successors, especially during stressful situations.

Finsum: Raymond James conducts an annual survey of retired advisors to find out how many are happy and why. One of the major takeaways is the importance of proactive and effective succession planning.

According to the study, nearly two-thirds of financial advisors state that they are primarily influenced by factors within their own practice when constructing portfolios. Conversely, these advisors are less likely to take input from their broker dealer (B/D) or custodian. The divergences between advisor channels pose challenges for asset managers in establishing their products and services effectively. 

Cerulli suggests that asset managers concentrate their distribution efforts on channels where advisors rely more on internal portfolio construction methods. Furthermore, the research highlights that advisors within the independent registered investment advisor (RIA) channel tend to construct portfolios internally, followed closely by hybrid RIAs. 

Asset managers who allocate distribution resources towards channels such as independent and hybrid RIAs, where advisors tend to make their own investment selections, may have an advantage in portfolio construction.  

Finsum: Independent RIAs help meet their clients’ needs with better portfolios.

Goldman Sachs Asset Management (GSAM) is aiming to become one of the top 5 providers of model portfolios. Currently, GSAM is the ninth largest in terms of asset managers, with model portfolio assets of $14.5 billion. Over the next decade, model portfolios are projected to have more than $11 trillion in assets in total.

According to Alexandra Wilson-Elizondo, the co-CIO of GSAM’s multi-asset solutions group, the firm’s strategy is to outgrow its competitors rather than take existing market share as model portfolio assets are projected to grow 20% annually. Model portfolios consist of off-the-shelf strategies and custom models. Demand for the latter has been robust among wealthy clients.

Increasing adoption by financial advisors is the primary growth driver for the category. By decreasing time and resources spent on investment management, advisors can add more value in areas like client service, tax planning, and estate management. 

Currently, the leading provider of model portfolios among asset managers is Blackrock, followed by Wilshire Associates, Capital Group, and Vanguard. In 2019, GSAM bought S&P Global Market Intelligence, and it acquired NextCapital Group in 2022 to build the foundations of its model portfolio business.

Finsum: Goldman Sachs is aiming to grow its model portfolio segment and become a top-five provider among asset managers. Forecasts are for the category to grow 20% annually and exceed $11 trillion by 2030. 

There is a momentous demographic turnover that reshapes the financial advisor landscape. According to Cerulli, nearly 40% of advisors will be retiring in the next decade. Currently, 60% of assets are managed by advisors who are 55 and older, while the average age of an advisor is 50. 

This reality means that older advisors need to start thinking about succession planning. Proactive and proper succession planning can also help advisors maximize the value of their practice and ensure that their clients remain in good hands. Younger advisors should be formulating a strategy to capitalize on this opportunity. 

Some key elements to successfully transition to the next generation are recruiting to replenish talent, appealing to younger investors, and scaling engagement and client service by leveraging technology. 

At current rates, there are not enough new advisors to offset retirements and attrition. Therefore, it’s imperative that practices invest in recruitment efforts to identify talent and set them up for success. This entails looking at recruits from nontraditional backgrounds who have strong people and organizational skills. 

Another important step is to gear prospecting and client service for millennials and Generation Z. This means understanding their perspective and becoming fluent with technology. Finally, advisors should be investing in technology that can help them scale personalized service to increase their capabilities and serve more clients. 

Finsum: Succession planning will be even more critical in the coming decade due to the massive retirement wave in the financial advice industry. Here are some common elements of successful succession planning. 

Financial advisors are flocking to independence.  Some who switched to the RIA model, say it was a game-changer for their career, and they have gained an "entrepreneurial mindset" while creating lower-cost programs for clients.

This trend is widespread. Cerulli reports the RIA channel is experiencing the fastest growth in advisor headcount. The number of independent RIAs and advisors working there have grown steadily over the past decade. Advisors are seeking independence for several reasons. Clients demand lower fees, and RIAs allow advisors to deliver quality service at a competitive price. Wirehouses, on the other hand, are raising advisor costs.

One highlights of the RIA fee-based model is it has made RIAs a target for private equity firms. Cerulli predicts RIAs will control nearly a third of the market by 2027. Advisors like Harry Figgie see this as inevitable due to the open architecture, financial benefits, and equity-building opportunities offered by the RIA model.

Finsum: The RIA model has been made easier by the technological advancements in advisor space, and this trend might continue to ramp up.