Addressing a crowd of more than 3,600 attendees at IMPACT®
2014, the nation’s largest and longest-running annual gathering of
independent registered investment advisors (RIAs), Bernie
Clark, executive vice president of Charles Schwab & Co. Inc. and
head of Schwab
Advisor Services, challenged RIAs to pay attention to generational
changes impacting the industry at both the firm and client level, as
well as the environment of disruption happening on an even larger scale
in well-established industries – from transportation and payment systems
to healthcare and vacation lodging.
Bernie Clark, executive vice president and head of Schwab Advisor Services (Photo: Business Wire)
“Now is the time for independent advisors to actively focus on acquiring
the next generation of clients, especially given that the majority of
advisors tell us they are planning for legacy1,” said
Clark. “In order to be the model of the future – to serve generations of
investors to come – advisors must constantly anticipate and evolve in
order to remain relevant, particularly as we see where consumer and
investor trends are heading. Whether it is creating a robust online
presence for your firm, or harnessing mobile and cloud technology that
will allow you to adapt and deliver service the way these clients expect
it, now is exactly the right time to focus on the future – from a
position of strength.”
Planning for the next generation of assets is important because much of
the RIA industry’s current success is built on an aging population,
which is now moving into retirement and de-accumulation. According to
Schwab’s Independent Advisor Outlook Study (IAOS)2,
nearly 70 percent of RIA clients are retired or expected to retire
within the next 10 years and, among this group, 63 percent are drawing
down their portfolios, including principal. At the same time, there is
$16 trillion3 in wealth transfer expected by 2050, and by
Schwab’s estimates more than $3.5 trillion is already in the hands of
what Schwab calls Generation Now.
Positioning RIA firms for success with Generation Now
Showcasing results from the Charles
Schwab Generation Now Study for RIAs published earlier this year,
Clark shared Schwab’s insights into the Generation Now investor –
affluent individuals between the ages of 30 and 45 who are following on
the heels of advisors’ current pre-retired or retired clients. Schwab’s
research shows they are a great fit for advisors under the RIA model.
“We have focused this year on busting through misconceptions and myths
surrounding this next generation of investors. It has become clear that
RIAs have a strong value proposition when it comes to Generation Now,
and we are aligning our efforts to leverage our expertise and resources
toward empowering RIAs to win and serve these emerging clients,” said
Clark. “We feel advisors also need to take active steps at the
individual firm level to be out in front of this opportunity, ensuring
that they are putting themselves in Generation Now’s sights and meeting
them where they are.”
Underscoring the significant opportunities ahead for firm growth, Clark
called on RIAs to empower themselves and their firms to meet this
opportunity by “understanding and gaining the trust” of Generation Now
clients and raising awareness of the client-first benefits of the
independent RIA model, which is largely unknown to this cohort.
Clark outlined four key ways for RIAs to position their firms for
success with Generation Now:
-
Make yourself known
-
Demonstrate how you are different
-
Become indispensable
-
Ignite changes happening within your own firms
Make yourself known
Clark encouraged advisors to start by developing a clear firm value
proposition and then communicating that value proposition across your
network. Among the steps RIAs can take:
-
Create a referral culture: Develop a strategy to
institutionalize the referral process through existing clients and
centers of influence. To support firms on this front, Schwab announced
a new Insight to Action Program, “Creating a Referral Culture,” which
aims to help everyone in a firm recognize, create and capitalize on
referable moments, in addition to helping advisors clearly articulate
their value proposition. The new program will be available later this
year.
“Everyone in your firm needs to be able to clearly articulate your
firm’s value and the things that differentiate you,” said Clark.
-
Maximize your online footprint: When it comes to finding an
advisor, “our research shows that Generation Now does their homework
and they do much of it online,” said Clark. Advisors need to make sure
their value proposition is clearly articulated on their website and
across their active social media channels so that the firm will show
up in online research and give advisors a better chance to connect
with these prospects.
-
Tap current client base: Clients’ adult children are the
potential beneficiaries of the expected $16 trillion wealth transfer
projected by 2050, and yet according to IAOS only 16 percent of
advisors are routinely in contact with the children of clients.
“There is no better way to deepen relationships than by helping the
families of current clients,” said Clark.
-
Use RIA
Stands for You: Launched by Schwab in 2011, the site contains
a wealth of educational resources and marketing templates to help RIAs
explain the value of the RIA model to investors.
Firms can also register for the free RIA Stands for You advisor
directory to make it easier for prospects to find them. This is an
important step given that, according to Schwab’s Generation Now
research, these individuals believe good advisors exist, but they don’t
always know where to find them. Since the directory launched last year,
there have been more than 10,000 searches that have resulted in some
kind of follow up with an RIA.
Demonstrate how you are different
The Generation Now research found these individuals are wary of the
financial industry and advisors and therefore RIAs must build trust via
collaborative relationships, listening and transparency. Clark suggested
several ways for RIAs to do this, including:
-
Demonstrate shared values: Generation Now investors are looking
for an advisor who can build a trusted relationship based on empathy
and understanding of the whole person, not just their financial goals,
according to Schwab’s study.
In order to support advisors on this front, Schwab has launched the
Schwab Insights HubTM, a new centralized resource for RIAs
bringing together key intelligence, strategic insights and points of
view to support advisors in their businesses. Of note, the hub includes
a range of resources to help advisors know and understand Generation Now
clients based on the extensive qualitative research Schwab undertook
earlier this year.
“As the largest and longest-serving custodian of RIAs, Schwab has a
unique collective view of RIA firms and in-depth and valuable insights
on the needs of their current and future clients,” said Clark. “We have
a deep well of existing information and will continue to commission
proprietary research and viewpoints that will make this one-stop
destination a valuable resource for RIAs to leverage the knowledge,
expertise and perspectives they need for ongoing success.”
-
Identify, acquire and develop the right talent: “The RIA model
is defined by the individuals on the front lines of client service and
the future of the industry relies heavily on the incoming class of
young advisors to this space,” says Clark. RIA firms can set
themselves apart by finding and developing talent that is able to
connect with and understand Generation Now clients.
In support of this need, Schwab Advisor Services has launched a
comprehensive plan to help advisors understand the opportunity for and
value of creating a diverse workforce. Called RIA Talent AdvantageTM,
the program is designed to help firms attract, promote and retain
diverse talent and thrive in a highly competitive marketplace.
The program will focus on three important aspects of advisor talent:
individuals to serve Generation Now, ethnic diversity and women. More
information on the program is available here.
Schwab is also expanding its support of universities in an ongoing
effort to help cultivate the advisors of the future. In addition to its
existing relationship with Texas
Tech and University of California, Irvine, Schwab is embarking on a
$200,000 commitment to Virginia Tech, which will include:
-
Establishing the Charles Schwab Financial Planning Suite through
renovation of existing space used by the school’s Financial Planning
Program;
-
Underwriting new course offerings and the potential expansion of
existing courses related to financial planning, along with increased
opportunities for hands-on learning and community outreach for
students in the financial planning program;
-
Providing support for the school’s proposed Business Learning
Community, a state-of-the-art home for the Pamplin College of
Business, which will provide an enriched learning environment for
tomorrow’s financial planners.
Schwab has also signed a three-year pledge of $100,000 to the University
of Akron. The funds will be used to accelerate enrollment in its CFP
program by hiring a director to recruit students and build awareness of
a career in financial planning.
“It is critical to raise awareness for the independent model as a
differentiated and compelling career choice for young people from all
backgrounds who are looking to enter the financial advisory space, and
our support of educational institutions around the country enables us to
play a role in this,” said Clark.
Become indispensable
Individuals have come to expect a certain level of service,
accessibility and responsiveness in their day-to-day lives, and
Generation Now investors are no exception. Schwab’s Generation Now
research found that these individuals are seeking transparent
relationships with their advisors and they expect to be heavily involved
in decisions about their investment strategy.
“Technology can be used to fundamentally underscore the value of an RIA
by enabling advisors to access and share information, customize insights
and connect with clients in real-time and on-demand,” said Clark. “It
also provides an important new level of transparency for investors. New
solutions such as e-authorizations and portal-based performance
reporting give investors a direct line of sight into their finances,
including how their advisor is implementing advice and overall progress
against long term goals.”
Among Clark’s calls to action for RIAs:
-
Adapt service models to reflect the reality of how people seek and
exchange information today – on their terms: “Generation Now
investors demand a different approach to technology, expecting it to
be infused into the work they do with their independent advisors,”
says Clark.
According to the most recent IAOS released today, three quarters of
advisors use mobile apps in their daily lives outside the office and yet
fewer than half are using this technology in their firms. That said, the
gap appears set to close, with an additional 34 percent planning to
leverage mobile apps in their business within the next two years. Clark
directed advisors to Schwab’s white label app – Schwab Advisor Mobile
Connect – which enables advisors to customize and brand their mobile
presence and keep pace with how today’s clients are interacting with
information and services.
Schwab also announced that Schwab Advisor Portfolio Connect (formerly
Project PM2), its new portfolio management solution, is in
beta testing and is being previewed at IMPACT this year. First mentioned
at IMPACT 2013, the new solution will offer a rich, dynamic view of
client portfolios so advisors can easily explore and share information
with clients, while also providing clients with more visibility into
their finances.
-
Creating a pipeline for the next generation of emerging affluent
clients via automated advice: Clark also addressed a recent
announcement from The Charles Schwab Corporation regarding the planned
launch of Schwab
Intelligent Portfolios™, the company’s new
automated investment advisory service that will offer advisors on
Schwab’s platform the option to integrate a new tool into their
practices designed to offer scale and efficiency for investors with
less complex investing needs.
Commenting on the new offer, Clark said, “Schwab Intelligent Portfolios™
may be a good solution for advisors wishing to serve their existing
clients’ children or those with fewer assets who are in asset
accumulation mode. It can also help create a pipeline for the next
generation of emerging affluent clients who may not yet have sufficient
assets for more traditional approaches, but who will grow over time.”
Schwab Intelligent Portfolios™ will be available to RIAs in 2015.
Ignite changes happening within your own firms
Lastly, Clark called on founding and next generation advisors to come
together to pursue the future together. Noting that generational change
is happening inside RIA firms just as it is in the investing public,
Clark said, “Your clients are de-accumulating, younger investors are
knocking at your doors, and members of the next generation are moving
into leadership positions in your firms. Take advantage of that dynamic.”
“All of you who see yourself in Generation Now – you have an opportunity
to lead and shape everything from relationships to new models to
emerging technologies. Those of you who helped make this industry what
it is today have the opportunity to apply your experience to the coming
changes and ensure a vibrant future for your firms. Now is the time to
start pursuing that future,” said Clark in closing. “You’ve grown this
industry to $4 trillion in assets. You are on top of your game. We know
it. Your competition knows it. Most importantly, your clients know it.
Now – let’s bring it to the next generation of investors.”
About the Charles Schwab Generation Now Study for RIAs
Charles Schwab Generation Now Study for RIAs was conducted for
Schwab Advisor Services™ by Egg Strategy, a strategic research firm. The
study, which was released in 2014, included 40 participants, men and
women ages 30-45 with earned or inherited investable assets of $500K
(excluding real estate and business holdings), or a household income of
at least $150,000. The term Generation Now reflects the immediate
opportunity that this incoming cohort of high-net-worth investors may
represent for RIAs. All data was self-reported by participants and not
validated or verified. Egg Strategy is not affiliated with nor employed
by Charles Schwab & Co., Inc. Investors participated in this study
between March 24, 2014 and April 11, 2014.
An executive summary of the Charles Schwab
Generation Now Study for RIAs is available at: www.aboutschwab.com/press/research.
About the Independent Advisor Outlook Study
The Independent Advisor Outlook Study, conducted for Schwab
Advisor Services by Koski Research, has a 3.65 percent margin of error.
Koski Research is not affiliated with nor employed by Charles Schwab &
Co. Inc. All data is self-reported by study participants and is not
verified or validated.
For the November 2014 report, advisors participated in the study between
September 10 and September 23, 2014. For the June 2014
report, advisors participated in the study between April 15 and
May 6, 2014.
Detailed findings can be found at www.aboutschwab.com/press/research.
About Schwab Performance Technologies
Schwab Performance Technologies® (SPT) is a subsidiary of The Charles
Schwab Corporation and a leading provider of portfolio management and
accounting solutions to approximately 3,800 independent financial
advisors and investment managers. PortfolioCenter®, PortfolioServices,
and Schwab OpenView Integrated Office™ are products of SPT. An open
architecture firm, SPT provides services to all independent advisors
regardless of custodial relationships. SPT also supports third-party
outsourcing providers that use PortfolioCenter as the basis for their
offering. More information is available at www.schwabpt.com.
Schwab Advisor Mobile Connect is a product of SPT. SPT and Schwab are
affiliated as separate subsidiaries of The Charles Schwab Corporation,
but their respective products and services are independent of each
other. Schwab is a registered broker-dealer that provides brokerage
services, while SPT licenses software and provides related technology
products and services.
Schwab Advisor Portfolio Connect is a product of SPT.
About Schwab Intelligent Portfolios™
Schwab Intelligent Portfolios™ will be made available
through Schwab Wealth Investment Advisory, Inc. (SWIA), which has filed
an application with the SEC to register as an investment adviser.
Portfolio management services will be provided by Charles Schwab
Investment Advisory, Inc. (CSIA). SWIA, CSIA, and Charles Schwab Bank
are affiliates of Charles Schwab & Co., Inc. and subsidiaries of The
Charles Schwab Corporation.
Follow IMPACT 2014 news & updates @Schwab4RIAs #SchwabIMPACT
About 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
Brokerage Products: Not FDIC-Insured · No Bank Guarantee · May Lose
Value
Charles Schwab & Co., Inc. and Charles Schwab Bank are separate but
affiliated companies and subsidiaries of The Charles Schwab Corporation.
Brokerage products, including the Schwab One brokerage account, are
offered by Charles Schwab & Co., Inc., Member SIPC. Deposit and lending
products, are offered by Charles Schwab Bank, Member FDIC and an Equal
Housing Lender.
For general informational purposes. 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.
Independent investment advisors are not owned by, affiliated with or
supervised by Charles Schwab & Co. Inc.
Schwab is not affiliated with Texas Tech, University of California,
Irvine, Virginia Tech and University of Akron.
1 Schwab Independent Advisor Outlook Study,
June 2014
2 Schwab Independent Advisor Outlook Study,
June 2014
3 Cerulli Quantitative Update – Retail
Investor Product Usage, 2011, page 247
(1114-7433)
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