Financial Graph

RIA Business Trends for 2021

Feb 2, 2021 12:39:49 PM | Roger Wohlner

Topics: Trust Platform, Investment Advisors

As we move into a new year, there are a number of business trends for RIAs to watch in 2021. Some of these trends were accelerated by the impact of the COVID-19 pandemic that began in 2020 and that still impacts us. Here are some RIA business trends to watch in 2021 and beyond.  

Meeting Virtually 

The use of virtual meetings began prior to 2020 but has certainly accelerated as a result of the pandemic. Beyond the health and safety issues, the trend toward virtual meetings is part of a broader trend of clients and advisors working together remotely. Clients can maintain a relationship with a trusted advisor if they relocate. They are also not limited to searching for advisors only within their local geographic area. Additionally, many younger clients don’t have the desire to meet with their advisor in their office.  

RIAs who utilize technology to create virtual meetings that can help build and solidify client relationships will have an advantage in 2021 and beyond.  

Aging Advisors 

A significant percentage of the financial advisor population is age 55 or older. This begs the need for advisors to plan for their own retirement, including an exit plan from their business.  

In recent years we have seen a trend of consolidation in the RIA space, with larger firms buying smaller firms. We expect to see this trend continue. We also expect to see RIAs formulating and implementing succession plans of various types in 2021 and beyond. This is crucial for both RIAs and for their clients.  

Sustainable Investing 

Sustainable investing has been gaining momentum for a number of years. Interest grew in 2020 in part due to the impact of the pandemic. Sustainable investing and the use of ESG factors in looking at investments appeals to many investors and is a solid investing tool.  

At the very least RIAs will want to be sure that they are knowledgeable in this area to be able to advise those clients with an interest. This might also be a tool that you consider incorporating into your investment advice methodology.  

Retirement Advice 

More and more Baby Boomers are reaching retirement age each year. These Boomers need retirement and financial planning advice. RIA firms working with this client demographic need to be prepared to provide the advice these clients need not only as they approach retirement, but also in dealing with the various financial issues that arise once they enter retirement.  

The Next Generation of Clients 

Cerulli Associates estimates that some 45 million households will be transferring over $68 trillion in wealth to the next generation over the next 25 years. Some of these recipients may be the next generation of your Boomer client’s families.  

For those RIAs who want to retain these assets, or who are looking to court this next generation of clients, you may need to adapt your business a bit. Many of these next generation clients are looking for a different relationship with their financial advisor than their parents had.  

This will include technology that allows clients to access their information and even some types of advice through a client portal on your website. It might include offering an app they can use on their devices. And it might also involve options for advice models other than the traditional AUM option. In other words, RIAs who want to attract the next generation of clients will need to listen to what they want and adapt in 2021 and beyond.  

Technology 

The trend towards the increased use of technology in all aspects of the RIA business has been on the rise for a number of years. The pandemic and the advent of working remotely has served to re-emphasize the need for cutting edge technology in all areas of the business. This is a trend that will continue into 2021 and certainly well beyond.  

The use of data aggregation tools that allow an advisor to capture data for all accounts owned by a client, whether the advisor directly manages them or not, is on the rise. This enhances your ability to analyze a client’s overall financial situation quickly and easily. The best data aggregation tools integrate seamlessly with an advisor’s portfolio management and financial planning software.  

Even with advisors and RIA firm staff returning to the office once the impact of the pandemic subsides, it is likely that some remote work will continue. This points to the need for added data security to ensure that client data is not compromised regardless of where the work takes place.  

More so, technology is the engine that is driving several of the trends we discussed above. Robust virtual meetings are all about technology including not only solid video technology, but also that ability to easily share data electronically between the advisor and the client.  

Summary 

These are a few of the trends we see impacting RIA firms in 2021. How and to what extent they impact your firm will, of course, vary based on your situation.  

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