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Industry Spotlight > RIAs

Emerging RIA Trends That Can’t Be Ignored

By John Manganaro

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What You Need to Know

  • The services of skilled, independent advisors are in high demand, especially those with retirement expertise.
  • The RIA industry enjoys significant opportunities for growth, but also significant emerging challenges.
  • These include the aging of the advisory population and ever-growing client expectations.

With its December purchases of Generations Wealth Management and Kairos Private Wealth, Captrust Financial Advisors surpassed its 60th acquisition since 2006.

The firm has grown steadily via acquisitions and organic growth since its founding in 1997, and it now sits firmly among the largest independent registered investment advisory shops in the U.S. As of year-end 2022, the firm advised on more than $600 billion in client assets via its nationwide network of more than 500 advisory professionals.

According to Nick DeCenso, Captrust’s director of wealth management, the firm’s continued success in recruiting new practices and clients is a testament to its investment in advisor support capabilities, new technologies and a client-first service model.

In a new conversation with ThinkAdvisor, DeCenso offered some key insights into Captrust’s strategic priorities and its assessment of the biggest challenges and opportunities facing independent RIAs in 2023 and beyond.

As DeCenso explains in the Q&A dialogue presented below, the prospects for growth remain highly compelling. Simply put, as the financial lives of Americans at all wealth levels grow increasingly complex, the services of skilled advisors are in higher and higher demand.

On the other hand, DeCenso says, there are a number of emerging hurdles facing the RIA industry across the board, such as the aging of the “entrepreneurial” advisory population and the need to attract more diverse talent that mirrors the increasingly diverse and dynamic fabric of the U.S. population. All in all, it’s a great time to be an independent RIA, DeCenso says, but it’s no time to rest on one’s laurels.

THINKADVISOR: To begin with, do you agree with the perspective of other RIA firm leaders who say the wealth management business is growing more complex every day, both from the RIA’s perspective and from the clients’ point of view?

NICK DECENSO: Absolutely, I think that is beyond question. From our point of view within Captrust, I think we can point to a number of main factors that are contributing to greater complexity, and also to better client outcomes.

The first trend is the shift away from the traditional focus on investment performance and investment management as the core of the RIA’s value proposition. It is a shift towards what I would call true wealth planning, and it’s having a great impact on our clients.

We have worked hard to make this shift happen within Captrust, and while I feel like we are a good half-step ahead of the competition, it is clear that the whole industry is moving in this direction. The basic reason is that the investment management piece is more commoditized, and most clients today understand this fact. They know they can get good investments in a lot of different places, so they are seeking much more than that from their advisory professionals.

Yes, we continue to work hard to deliver top quality investment portfolios, but we know that we can move the needle much further by providing genuine financial planning. In fact, when we are dealing with prospective clients, we lead with our planning capabilities rather than our investment capabilities.

How do you define financial planning as opposed to investment management?

We define financial planning as looking at a client’s entire financial picture and advising them in a holistic way about how to achieve their short- and long-term financial goals. It’s also about zooming out and incorporating the family’s needs, as well.

Speaking of long-term goals, I would say the other main planning trend we are seeing is just this incredible focus on planning for retirement, again from a more holistic perspective that speaks about so much more than just the investments. It’s about tax planning, income planning, estate planning and everything else that goes into a successful retirement.

Not only are we helping the big wave of people who are closing in on retirement in the coming decade, but we also work hard to deliver the appropriate retirement planning services to our younger clients, so they can get on the right foot.

How else have client expectations evolved in recent years?

One big difference that I would point to in 2023 is the total willingness among clients to engage in a digital-first manner, and I think this is obviously an outgrowth of the COVID pandemic.

Interestingly, we had already started to meet with some clients virtually pretty often in the time before the pandemic. Now that is the norm for so many client interactions — and not just the meetings with our youngest or most tech-savvy clients. Plenty of our core, older clients in our retirement segment are just as happy to utilize these services as anyone else.

Today, when we do go out and meet a client or prospect in person, it can be a special experience. Perhaps we organize a meeting with the client’s broader family to talk about intergenerational wealth or maybe some other sensitive topics around estate planning.

I think this change is here to stay, and that both our firm and our clients will benefit as a result. We can hire people and service clients in a broader set of regions, and we can pursue top talent in more diverse places.

Do you agree with other RIA leaders who suggest staffing issues and succession planning could be key challenges in the decade ahead?

Yes I do think the staffing and succession planning issues are a big deal, but I’m confident in the industry’s ability to cope, both speaking for Captrust and for other leading firms.

I also think the industry will do a good job having the older generation of advisors hand off clients and relationships to the next generation. It’s interesting, because we actually already have clients who are asking us about this. They want to start building relationships with our younger advisors.

Even older clients, they don’t necessarily want to work with the oldest advisors out there or someone who is their age or older. Often, they have adult children, and they want to start to introduce their adult children to an advisor who has a long career runway.

One thing that will be harder to do is to replace the real entrepreneurial advisors who have made the RIA and financial planning business what it is today. These people are harder to replace. People who can serve clients well are not necessarily the same people who are the true entrepreneurs.

One succession strategy we have put in place is to create multigenerational teams wherever we can — to really get ahead of that conversation. By and large, we are in a business where advisors can work almost as long as they want to, which helps, but you really have to be smart about getting the next generation of advisors up and running.

What are the biggest challenges you see in terms of delivering holistic advice in the coming years?

Legislative changes and tax law issues immediately come to mind. They are always such a big deal, and right now we are at a point of significant uncertainty with respect to the tax outlook.

As we know, the Tax Cuts and Jobs Act made significant changes to individual income taxes and the estate tax, but almost all these provisions expire after 2025. It’s a tough position to be in as a financial planner. Do you take action now or do you wait and see what other legislative changes are in store?

A lot of advisors will assume that taking action earlier is always better, but you really have to be careful there. Things can change at the last minute, and you might have spent a lot of time and effort trying to update a tax plan that ends up being irrelevant due to unforeseen changes.

I also think the retirements of experienced certified public accountants and estate planning attorneys is a really big deal. Given our scale, we have been able to build an internal team with this expertise, but frankly, even with our resources we are seeing demand for these services outstripping supply.

John Manganaro

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