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Practice Management > Building Your Business

6 Ways to Adapt Your Investment Offerings to the Digital Age

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What You Need to Know

  • As interest rates remain low and investors gravitate to tech platforms, advisors must evolve or die.
  • Few ultra-wealthy investors have all their assets managed in one place. Grow your share of wallet and strengthen your relationships.
  • Consider adding alternative investments, via outsourcing if necessary.

Adapt or die. Over the past few decades, we’ve seen a handful of digital players completely upend the business landscape, rendering large companies — and entire industries — obsolete. But the shift isn’t over, nor is it limited to entertainment and consumer-oriented brands.   

According to Statista, the number of investors using robo-advisor financial planning services is expected to rise to 393.7 million by 2023, “nearly three times more than pre-pandemic figures.”

If financial advisors want to not only survive but thrive amid the greatest intergenerational transfer of wealth in history, they’ll need to think long and hard about the value they provide to their clients. 

Here are six steps that will help RIAs grow their businesses and provide added value to their clients.  

1. Forget the 60/40 Rule

For most of the past 50-plus years, investors could balance their risk profiles simply by putting their money in a 60/40 stock-bond allocation. But that equation no longer adds up. In low-interest rate environments, traditional safeguards like bonds fail to provide an adequate buffer against volatility.

With most asset classes becoming highly correlated during periods of market stress, financial advisors need to look elsewhere to protect their clients against the real risks of a market downturn — and many RIAs are employing a strategy long used by their institutional counterparts: risk mitigation or tail hedging.

With tail hedging, investors effectively insure a portion of their portfolio. As an example, when that “insurance” kicks in, the 10% of your portfolio that is allocated to the protection program can move to 30% and allow you to reallocate capital, buying stocks at lower, more attractive prices. Not only do you cushion the downside volatility for the entire portfolio, you become a buyer when everyone else is a seller. 

2. Create Yield in a Near-Zero Interest Rate Environment

As investors demand income, advisors are between a rock and a hard place. Rates are suppressed, and even junk bonds are now officially generating negative yields after inflation. Private credit, a near $1 trillion industry, has filled the vacuum that banks created by pulling back from corporate lending due to regulatory changes.

These loans can produce significantly higher yields (close to 8% on average according to several sources) and are often floating rate instruments, which make them less sensitive to inflationary concerns. Accessing top-tier credit managers will often come at the expense of immediate liquidity, but this is also why these vehicles can produce superior risk-adjusted returns.

3. Consider Adding (More) Alternatives/Private Investments

According to a 2021 survey by KKR, ultra-high-net-worth investors have more than 40% of assets in alternatives, with just over 30% in equities. The average investor, and even most high-net-worth individuals, are heavily weighted to equities and have less access to unique alternatives.

Not all alternatives are created equal, so it’s important to outsource this function to an outside firm that has highly trained specialists and, more importantly, has significant collective “buying power” to gain access to exclusive investments that are typically limited in the size of available allocation. 

4. Improve Your Margins to Scale Business

Speaking of outsourcing: Financial advisors are getting squeezed from all sides, whether it is mutual funds and ETFs offered for free, or no-cost trading platforms like Robinhood. To improve bottom lines, RIAs need to offer better investment opportunities that aren’t subject to fee compression.

They need alternative investments. But instead of taking on the added overhead costs associated with finding and training an in-house team, RIAs will find it’s far more cost-effective to partner with a third-party specialist. 

5. Grow Your Market Share

Like many small-business owners, financial advisors often have a tough time balancing the needs of their existing clients with prospecting for new business. But RIAs can effectively do both — serve their clients and generate increased revenue — by tapping into their current clientele for a larger share of their business.

Few ultra-high-net-worth investors keep all their assets in one place. As you continue to grow your share of wallet with clients, you’ll go a long way to strengthening those relationships. Remember, your existing clients aren’t just your best prospects, they’re also your competitors’ prospects.

6. Be Proactive

You can either be proactive or reactive. Rest assured, if you’re not talking to clients about alternatives, someone else will. And what will you do when they tell you what they’ve been hearing? Say no because it is not something on your platform? The problem is that clients will get tired of hearing you say no and will eventually turn to someone who will say yes.

That is something you want to guard against, as they may get involved with something that is not institutional quality, which can lead to a disastrous outcome. Clients want access to value-added opportunities and not just beta-heavy exposure. They expect you to vet and identify alpha-generating alternatives, and the best way to deliver is to partner with a firm that has complementary resources, expertise and connections. 

For financial advisors, the dangers are real. Tech platforms are taking a larger share of business. They’re forcing disintermediation of the independent and brokerage advisor much like they did with the big banks.

As Millennials and Gen Z begin to inherit a larger share of wealth, they’re going to naturally gravitate to these platforms. RIAs must take proactive steps to add value or risk becoming their industry’s next Blockbuster or RadioShack. 


Christopher A. Zook is the Founder, Chairman and Chief Investment Officer of CAZ Investments, which allows RIAs and high-net-worth individuals to invest in private equity, real estate and other exclusive opportunities traditionally available only to large institutions.