Is it time to forego the traditional wholesaler and advisor relationship?
According to a new research report from Practical Perspectives, the traditional wholesaler/advisor model that has been highly successful in mining and developing other distribution channels such as wirehouse or independent broker-dealers has shown to be less useful with registered investment advisors (RIAs).
Practical Perspectives suggests that product providers, distributors and custodians must adopt a new digital-based strategy in order to build deeper relationships with RIAs. It calls this new strategy “robo-wholesaling.”
“Robo-wholesaling is essentially a metaphor to describe the development of a digital-focused strategy that captures many of the positive characteristics of the traditional wholesaler and advisor relationship,” Rich Gauger, co-author of the report, said in a statement.
There’s also a huge opportunity for wholesalers among RIAs given the growth and activity of this market segment.
Practical Perspectives is calling the growth in RIA firms “nothing short of dramatic” – largely in part due to the ongoing “breakaway” trend of advisors leaving brokerage firms and being recruited by existing RIA firms or creating a new RIA as a solo practitioner or team practice.
According to the report, there are now more than 11,000 firms registered with the Securities and Exchange Commission and an additional 20,000 state-registered firms with average assets under management of $67 million.
Many RIA firms are solo practitioners with fewer than 100 clients, but there has been significant growth among the larger RIA firms with an estimated 500 firms managing over $1 billion in assets, according to Practical Perspectives.
The report, which is based on proprietary research conducted with more than 1,000 RIAs, finds evidence among these RIAs that wholesalers will need to change in order to meet the preferences and complex needs of this growing segment of advisors.
For example, the report finds that RIAs have significantly less interest in marketing and sales support (including traditional wholesalers) than other advisors.