What You Need to Know
- Ninety-three percent of advisors across all channels expect to generate at least half of their revenue from advisory fees by 2023.
- The number of financial planning practices across all channels grew at a 5.3% compound annual rate.
- To preserve profitability as they add services, advisors can either raise their fees or add monthly subscription fees or fixed financial planning fees.
An industrywide shift away from brokerage, broader adoption of financial planning and popularity of independent business models are coalescing to erode the RIA channel’s main differentiating factors, Cerulli Associates reported Tuesday.
This has RIAs considering whether to extend their service offerings to deepen their influence with clients and prospective clients, the report said.
To unlock the RIA channel’s success formula and protect against advisor movement to independence, more broker-dealers are developing independent affiliation options, promoting financial planning and increasing opportunities for advisors to conduct fee-based or fee-only business.
According to the research, 93% of advisors across all channels expect to generate at least half of their revenue from advisory fees by 2023. Likewise, over the past five years, the number of financial planning practices across all channels grew at a 5.3% compound annual growth rate.
As a result, broker-dealers are elbowing in on what has historically been viewed as largely unique to the RIA channels — an independent, fee-based business centered on financial planning.
Besides this convergence of business models, investor influence, democratization of services and client acquisition challenges are encouraging RIAs to reevaluate their position in the marketplace.
Expanded Service Offerings
Some advisors are expanding their service offerings to combat value differentiation concerns and capture emerging opportunities. Over the next two years, the top areas of service are expansion trust services, digital advice platforms and concierge/lifestyle services, according to the report.