Small financial advisory firms owned and operated by their founders are being squeezed by the increasing number of mega firms with $500 million or more in assets on the one hand and the expanded presence of digital advisors on the other. If the stock market rout continues, they, like all other advisors depending on asset-based fees, will also be hurting from a decline in asset values.
These smaller advisory firms, popularly known as “lifestyle firms,” have “to have scale or specialization to compete,” says John Anderson, head of practice management at SEI, a third-party asset management platform that has produced a series of reports focusing on the future of the advisory industry in 2030 in association with the Financial Planning Association.
The second report in the series, Growth by Specialization, notes that over the next decade these firms “must find a way to differentiate themselves and create personalized and fulfilling experiences for their clients to compete in what will be a very competitive advisor business.”
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“If you want to succeed as an individual practitioner, you have got to have a specialty,” says Anderson.
The SEI/FPA report focuses on in-depth interviews with several individual owners of independent advisory firms, each choosing a different niche in order to thrive, but all having a well thought-out plan for growth along with marketing plans that highlight their expertise.