Independent advisors are steadily gaining market share in the high net worth (HNW) space, which has been traditionally dominated by wirehouses and private banks. Over the five years ending in 2022, RIAs and hybrid RIAs saw growth rates with HNW clients that exceed those of traditional BD-affiliated advisors. However, wirehouses still manage nearly 60% of HNW assets invested in separately managed accounts assets under management (AUM), according to Cerulli.
A key factor in this dynamic is a productivity gap between RIAs and wirehouse advisors, which makes it more difficult for RIAs to serve more clients in this space. According to Cerulli data from 2021, wirehouse advisors manage an average of $198 million in AUM per advisor, compared to approximately $88 million per advisor for RIAs.
This disparity can be attributed to wirehouses’ focus on fewer, higher net worth clients and greater access to advanced technology and resources. However, the wealth management landscape is rapidly evolving, offering new opportunities for independent advisors to compete more effectively to attract and retain clients.
How RIAs Can Level The Playing Field
Here are four strategies RIAs can implement to enhance their competitiveness in the HNW market:
Provide personalized investment solutions. HNW clients, particularly younger affluent households, are increasingly demanding personalized investment solutions. Next-generation clients expect hyper-personalized portfolios with investment options that align with their goals, values and preferences, such as impact investing or thematic strategies. Technology-enabled customization allows advisors to tailor investment strategies to reflect clients’ specific needs and preferences, which enhances investor satisfaction.
Advisors can also work to offer clients advanced tools that cater to their individual needs. For example, many advisors recognize the benefits of tax-loss harvesting, tax-efficient rebalancing and other strategies that can improve after-tax returns but may lack the tools or resources to implement them effectively.
Thankfully, independent advisors can access a wide variety of services through custodians and third-party platforms. Tools like our Tax Management Services, for example, enable independent advisors to implement tax strategies across various asset classes, enhancing the overall client experience while demonstrating the value of the advisory relationship.
Build a one-stop shop with expanded wealth management services. In a survey by Cerulli, HNW individuals said the most meaningful factor when selecting an advisor was services offered, closely followed by relationships. Today’s investors are increasingly seeking a “one-stop shop” that goes beyond just investment management services. Many also prioritize estate planning, tax services, charitable giving, private banking and intergenerational planning when choosing an advisor.
To deliver comprehensive financial outcomes that meet clients’ evolving goals and needs, independent advisors must expand their wealth management service offerings to include these critical areas.
Providing a broad range of services not only meets the diverse needs of clients but also fosters deeper relationships. By integrating investment strategies with holistic services like estate and charitable planning, advisors can demonstrate their commitment to supporting clients’ overall financial well-being. This comprehensive approach helps build trust and strengthens the advisor-client relationship, making independent advisors more appealing to HNW individuals seeking a partner in managing their financial lives.
This comprehensive approach helps build trust and strengthens the advisor-client relationship.
Leverage tech-forward outsourced service providers. Leveraging modern fintech solutions is one of the most effective ways to improve operational efficiency. Historically, RIAs may have had more limited access to advanced technology, but advancements in TAMP services and fintech solutions are helping to close the gap.
Platforms like ours provide integrated client management, portfolio management and financial planning tools, allowing advisors to deliver personalized services more efficiently. Independent advisors can also access a wider variety of investment products through multiple custodians and third-party platforms. Incorporating in-demand options like alternatives into the investment mix can provide unique return profiles and risk management benefits, which are increasingly important to HNW investors.
Institutionalizing the advisor practice by investing in technology, workflow and operational discipline will help advisors scale more effectively, manage risk and establish a sustainable infrastructure. This enables advisors to reinvest time in client relationships and prospects, thereby enhancing client service.
Outsource non-core activities. Outsourcing non-core activities can also have a tangible impact on efficiency. Wirehouse advisors typically benefit from extensive support in areas like research, compliance and administration, allowing them to focus more on client-facing and business growth activities. Independent advisors, particularly those operating solo or in smaller teams, may not have the same level of support, impacting overall productivity.
Outsourcing non-core activities can also have a tangible impact on efficiency.
Working with specialized firms that can handle these activities on an advisor’s behalf can allow independent advisors more time to focus on client relationships and business growth while benefiting from the same level of support available to wirehouse advisors.
David McNatt is EVP of Investment Solutions at AssetMark.
