Ron Carson: How the Pandemic Will Shape the Future of RIAs

Stepped-up advisory consolidation and an upsurge in clients embracing digital advice are two major changes the coronavirus pandemic will bring about in financial services, Ron Carson forecasts in an interview with ThinkAdvisor.

The influencer, who, over 37 years, has built a big multifaceted firm comprising Carson Wealth, Carson Partners and Carson Coaching, argues that financial services is “at the bend in the road”: Advisors must be committed to their business “heart and soul” if they are to succeed in the coming years.

The Omaha-based RIA, serving more than 33,000 families, grew from a practice Carson launched in his University of Nebraska dorm room in 1983. The most recent expansion came in 2012, when he established Carson Partners, attracting independent firms that the CFP has either acquired or in which he owns a lesser stake.

Carson Group has $12 billion in assets under management and more than 280 partner advisors nationwide. There are more than 120 partner offices, of which 24 are Carson Wealth branches.

“Trust in advisors is at an all-time low,” Carson, 55, states in his new book, “Proven in the Trenches: 11 Principles to Maximize Advisor Value and Transform Your Firm’s Future” (Harriman House-May 12).

At the start of the Kindle version, updated after the pandemic hit, Carson candidly opines that “financial services have for decades over-charged and under-delivered to the consumer.” Elsewhere in the book, he urges FAs to “turn this industry into a truly respected profession.”

In the interview, Carson discusses the “value war” in which advisors now find themselves; “accidental CEOs,” who need help shifting from FA to company leader; and the 200,000 square-foot office complex he’s constructing in Omaha that will feature a young-advisor training program in his philosophy and process.

Readers of “Proven in the Trenches” stand to gain by incorporating into their value proposition Carson’s “6 P’s”: promotion, presentation, positioning, people, process and pricing.

But perhaps the real secret to the born entrepreneur’s indisputable success is keeping a laminated list of goals in his shower. This lets him subconsciously work out business solutions, he insists.

ThinkAdvisor recently interviewed Carson by phone. He cautioned that advisors who fail to provide clients with “a great digital experience” will encounter rough seas.

Here are highlights of our conversation:

THINKADVISOR: Financial services is “at the bend in the road,” you write. Please explain. 

RON CARSON: Advisors will have to make a choice: Are you going to put your heart and soul into your business — or just sit back and relax and collect your 1%? I think [the latter] is a really bad choice. You need to evolve and adapt. You need to anticipate clients’ needs before they know they even have them and provide solutions they didn’t know were possible. That’s the “third dimension” of trust, and that’s what will be expected.

There’s “ferocious competition” for quality advisors, a major recruiter stressed recently.  Hasn’t that always been the case?

Yes, but today more so than ever because of the group we call “the rich and tired” — advisors that have done really well but are, kind of, worn out. They’ve gone through the 1987 crash, early 1990 recession, dot-com meltdown, global financial crisis and now the pandemic. So, they go, “Screw it. I don’t need this anymore.” They’re “retiring” [by] taking the cash flow from their business until there isn’t any cash flow left.

You write that the advisor “fee war” is actually a “value war.” Please elaborate.  

Advisors that define themselves as [solely] asset managers are under a lot of pressure because no one is willing to pay for something if they don’t see the value. For example, when COVID-19 [struck] and the big first market decline occurred, we were [connecting with] many of our partner advisors telling them, “Here’s what you should be doing and thinking about”: Roth IRA conversions [for one].

What else are you doing to help advisors address this crisis?

At the end of the second quarter, we’re rolling out a service that, by looking at the client’s past tax returns, generates specific actions that will save them money on their taxes. It’s all integrated into a seamless experience.

Exactly what does adding value do for the advisor’s practice?

The important thing is that the client can see the value and say, “Oh, that saved me ‘X’ and that saved me ‘Y.’” Eighty-two percent of our partners who have added that kind of value are showing significant inflows year over year. Our inflows are five times what they were year to date. This validates [the premise] that the consumer is looking for the high-value provider.

How will the coronavirus pandemic change advisory firms themselves?

It will accelerate scale — that consolidation we’ve been talking about for a long time. It started with Schwab eliminating transaction fees and then acquiring TD Ameritrade. Then COVID-19 hit, and all margin and cash were eliminated. This has put tremendous pressure on custodians. It will make them put pressure on advisors because they’ve lost transaction fees, and now they’ve lost their spread on cash.

How will they pressure FAs?

I predict they’ll say, “You need to pay us for services now.” But a lot of smaller advisors don’t have scale and are [only] marginally profitable. So if they have to start paying for services, it will force a lot of them to make a choice: get bigger, partner, or sell their firms.

How has the pandemic changed FAs’ day-to-day business?

We’re all figuring out how to communicate and deliver services differently [through video-conferencing, for example]. Even clients that had been very uncomfortable with Zoom, GoToMeeting or other such technology have now realized that it’s nothing to be afraid of and pretty easy to use.

What are the longer-term implications?

I think it’s going to accelerate the number of people that will be very comfortable getting advice digitally through their advisors.

You spoke a few minutes ago about anticipating clients’ needs. Would that occur through personal interaction or digital technology?

Both, either human integration or digitally. Technology is powering a lot of the processing and number-crunching; I don’t believe it’s going to replace the advisor. It will simply make the experience richer for clients and enable advisors to have time to spend with them. More and more consumers will be very comfortable receiving all their advice digitally.