The ancient Greek philosopher Heraclitus coined the adage, "the only constant in life is change," and that notion holds particularly true for registered investment advisors (RIAs). In an era marked by dynamic macroeconomic and geopolitical conditions, rapid technological advancements and a growing demand among next-generation investors for a differentiated client experience, RIAs need to embrace change to avoid falling behind forward-thinking peers.
With organic growth rates plummeting from 8.4 percent in 2021 to just 3.6 percent in 2022, RIAs need to adopt an entrepreneurial mindset to reverse the dire trend. This could mean adding new services to a practice, expanding geographically and/or conducting rigorous due diligence to ensure that any advisor recruitment aligns with the firm’s DNA.
The necessity of change to grow
To foster a culture of innovation and long-term sustainability, RIAs must first acknowledge the discomfort associated with change. While change is always unsettling, it serves as the key to unlocking organic growth in an industry accustomed to stability. A crucial aspect of this involves expanding the range of services offered by RIAs in response to the evolving expectations of younger generations of investors, who desire a more comprehensive and holistic approach to financial advice than their forebears.
This could entail collaboration with outsourced providers or the strategic recruitment of advisors with specialized expertise. By pursuing this route, RIAs not only elevate the client experience but also craft more complete and personalized financial plans. The discomfort of venturing into uncharted territory, adding new disciplines in addition to the typical services offered, can serve as a catalyst for transformative growth. However, this avenue demands meticulous due diligence to ensure alignment with the RIA's core values and DNA. Advisors seeking to join a practice must also embody an entrepreneurial mindset, recognizing the mutual growth potential of the partnership.
The strategic addition of talent and services positions RIAs to attract new clients and enables them to respond adeptly to evolving market demands. It’s a delicate balance—growing sustainably while preserving the fundamental identity of the firm. Any discomfort associated with the recruitment process can potentially translate into a worthwhile investment for the future of the RIA, enhancing its capacity for resilience and growth.
Venturing into unfamiliar geographies can act as another growth catalyst. Geographic expansion allows firms to tap into new client bases and can help to diversify revenue streams. While the prospect of entering new markets may initially seem daunting, the digital era has mitigated many barriers, making it more feasible for RIAs to navigate regulatory landscapes and understand local market trends. The discomfort of venturing into uncharted territory is outweighed by the potential for sustained growth and heightened relevance. Embracing the myriad of challenges associated with geographic expansion can help practices keep pace with the evolving dynamics of the industry, serving as a necessary step towards future-proofing the business.
Breaking free from comfort for sustained success
Ultimately, embracing discomfort can serve as a springboard for sustainable and scalable growth. As a McKinsey & Company article notes, wealth managers need to rethink their operating models to reignite growth. This means adopting a willingness to explore adding new services to a practice, recruiting advisors with specialized planning knowledge or turning to new geographies to tap into new client and prospect bases. This can help RIAs meet the evolving demands of the next generation, solidifying their role as trusted financial partners, as the ongoing wealth transfer forces advisors to prepare their firms in terms of both intellectual education and resources to meet heightened expectations.
It's time for RIAs to break free from the comfort zones that have defined the industry for many decades. Firms that embark on this entrepreneurial journey will be better positioned to thrive in an environment that now demands adaptability and innovation. The discomfort of change can become a strategic advantage–the RIAs who heed the call to embrace discomfort will emerge as leaders in this new era of wealth management.
Robert Sandrew is the Chief Growth Officer at Integrated Partners, a national financial planning and registered investment advisory firm,