A FURTHER LOOK
For Registered Investment Advisors, it’s all about the client.
November 2, 2016 / By David Root, Founder and CEO
Last week, I had the opportunity to attend the annual Charles Schwab Impact conference in San Diego. As the first to reach out to the independent advisor in 1987, it is the industry’s largest event attended by more than 1800 independent registered investment advisors (RIAs). The four-day conference is focused on enhancing the capabilities and visibility of our profession. It was a great opportunity to share ideas and best practices with other independent firms that have pledged to act as fiduciaries to serve in their clients’ best interests.
Our fiduciary role helps keep client relationships at the center of what we do. As a result, our industry continues to find new ways of creating value for our clients. That includes guidance and advice in areas of clients’ lives beyond finance. That’s why we’ve continued to talk about Financial Planning in previous editions of A Further Look.
The conference also gave us an opportunity to look more deeply at those we serve – our clients. As clients continue to demand greater transparency, value and advice aligned with their best interests – their changing preferences have led RIAs to move beyond investment management firms to become full-scale wealth management practices. Today, this includes embracing technology to lower costs and provide alternative planning and reporting methods that are easier to access.
As an industry we find ourselves guiding clients through a drawn out period of low interest rates, market volatility, and political uncertainty. In these volatile times clients need to have their advisors on their side in good times and challenging times. At Schwab Impact, Charles Schwab CEO, Walt Bettinger, reinforced this as he laid out his view for the future.
He reminded us that our independence was one of our true differentiators from the rest of the industry. He also pointed out that others are trying more and more to look like us. “The whole investing world is headed toward transparency, toward a fiduciary expectation.” He said.
In addition, Bettinger offered some insights as to where he believed the advisory world is headed. I’ve added a few notes of my own:
Relationships and planning versus out-performance will fuel client relationships.
We’ve stated on numerous occasions that creating Alpha involves more than stock performance. Our mix of Financial Planning and Asset Allocation featuring an appropriate mix of stocks, bonds and cash will provide the necessary foundation for retaining wealth.
Investment advice will increasingly trend toward a mix of technology and live professionals.
Delivery of services must include the ability of clients to access their information online, interact with their advisor remotely on their smart phones and maintain a personal ‘dashboard’ of their account information that they are able to review themselves.
Fee awareness and fiduciary expectations are here to stay.
“For the future, it has to be so much more than, “Hire us and we’ll beat the market.” We’ve outlined here before that our investment committee diligently constructs portfolios that are intended to “be the market” while providing options for those with greater risk thresholds to beat the market.
Brand loyalty is more transient than ever. … “It’s not what you say about yourself. It’s what others say about you.”
Emphasis on a brand that reflects our firm’s mission is paramount to our future. Last week, I highlighted our dual objectives of providing security and prosperity for clients as indicated by our logo. Consider the power of the Starbucks brand…craving financial security is not unlike craving a good cup of coffee!
Stockbrokers turning independent will fuel continued outsize growth in registered investment advisors.
“The competitive environment is going to get much, much greater.” Bettinger said. Therefore scale will play an increasingly large role in determining the winners.
We’re fortunate to have an industry leading custodian in Charles Schwab and resource partner Dynasty Financial Partners to help us drive scale and efficiency in meeting the needs of our high net worth clients.
Bettinger also reiterated “In certain asset classes, new forms of indexing and ETFs are likely to supplant a significant share of the active investment management space.” Today’s highly informed investors are looking for alternatives that are more transparent, easier to use and offer greater value.
So as I left San Diego, I felt energized by our decision to operate as an RIA, and proud that we were ahead of the curve on this one. The conference also reinforced our belief that our future success will be built on the success of our client relationships and planning capabilities that move beyond firms focused solely on “beating the market.”
We’ll continue to redefine what it means to be an independent financial advisor by finding new ways to create value for clients. That is a formula that Charles Schwab has embraced from the beginning – and boy has it worked for them!
Thanks for reading,
Dave
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David Root
David Root is Founder and CEO of D.B. Root & Company, a Pittsburgh-based wealth management firm. If you would like to contact David please e-mail him at d.rootjr@dbroot.com or call 412-227-2800. Read bio…
This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results. Asset allocation programs do not assure a profit or protect against loss in declining markets. No program can guarantee that any objective or goal will be achieved.
In addition to the normal risks associated with equity investing, narrowly focused investments typically exhibit higher volatility because of the non-diversified nature of the portfolios. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results.
Real estate investments are subject to a high degree of risk because of general economic or local market conditions; changes in supply or demand; competing properties in an area; changes in interest rates; and changes in tax, real estate, environmental, or zoning laws and regulations. Real estate units/shares fluctuate in value and may be redeemed for more or less than the original amount invested. There is no assurance that the investment objective will be attained.
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