Incorporates 10 years of Alliance for RIAs (aRIA) learnings on Scale, Durability and Human CapitalA new whitepaper from AGS outlines some of the primary business management issues facing the RIA industry going forward. To view the whitepaper, click here.
PHOENIX, March 15, 2023 /PRNewswire/ — In 2012 Advisor Growth Strategies (AGS), an integrated management consulting firm launched in 2009 to help owners advance their financial advisory firms, founded the Alliance for RIAs (aRIA) with some of the best registered investment advisors (RIAs) in the industry. The group was formed to provide insight into the future of wealth management and how owners can best optimize their business value and scale their firms. Now, John Furey, Managing Partner at AGS has authored a white paper, “The Future of RIAs: Scale, Durability and Human Capital,” which draws on over 10 years of aRIA’s collective knowledge and insight.
“The RIA industry has evolved considerably since we founded aRIA. With this white paper we outline some of the primary business management issues facing the RIA industry going forward,” explained John Furey, Managing Partner at Advisor Growth Strategies and author of the paper. “Our goal is to identify the key opportunities and challenges owners will face and to offer practical and actional solutions to RIA owners.”
Notable observations from the report include:
Firms that leverage best practices to design key elements of growing a business such as organizational structure, next generation equity plans, and KPIs are able to drive results. As the industry moves forward, KPIs and metrics will matter more than ever. Firms that can demonstrate a track record of growth and professional development will attract the best talent, be able to understand what is working and what is not in their client relationships, and manage their business valuation. In the 10 years since formation, aRIA firms realized a compound annual growth rate 23.1%, based on assets under management,
The Road Ahead
At least two dozen firms have a stated long-term goal of building a “national RIA,” and one could argue several firms are already there. By 2025, AGS expects there to be at least five firms and as many as ten RIAs who manage over $100B in AUM. The capabilities of these firms may start rivaling independent broker dealers and even wirehouses.
Building It In House
Larger RIAs are developing an organizational structure of functional experts that can support front line advisor professionals. This includes key areas of wealth management such as tax, insurance, estate planning, and holistic financial management versus simple financial planning. This will require firms to have a deeper bench of functional experts. Smaller firms will have to develop a niche capability or find a leverage point from an outsource provider or a partner through M&A.
Technology—Seen & Unseen
Technology will be even more critical in the future, but harder to predict direction as the RIA technology ecosystem has continued to become more complicated. Most RIAs can’t afford the resources required to keep track of all of the technology available to them and must rely on and leverage technology consultants and experts at partner firms to help them sift through the noise.
A More Rigorous & Aggressive Regulatory Environment
RIAs will likely face greater scrutiny from regulators in the future, requiring more time spent on processes and structures that may not directly benefit the client but will limit capital that could be better reinvested in a business.
Additionally, the paper provides some thoughts on what will drive RIA success in the future as well a list of practical action items for firms committed to growth and success.
“Overall, we think the future of the RIA industry is still quite bright. The RIA channel is still the fastest growing segment of wealth management,” Furey added. “Despite the challenges outlined in this paper, RIAs can adopt strategies and tactics that make their firms more attractive to potential ideal clients and most importantly the most talented professionals and position them to survive any market.”
About aRIA, The Alliance for RIAs
aRIA is a study group of successful entrepreneurs seeking to proactively improve the future of the RIA industry by building a culture and mantra of continuous learning. Each aRIA member has made a commitment to grow via acquisition, adding a new business line or by recruiting advisors. aRIA members meet regularly to share knowledge and help each other grow and scale their businesses. Our thought leadership is available to industry participants and may be downloaded from our site or by contacting us.
For more information on aRIA go to: https://www.allianceforrias.com/.
About Advisor Growth Strategies
Advisor Growth Strategies, LLC (“AGS”) is a M&A advisory and management consulting firm for Registered Investment Advisors (“RIAs”). AGS understands the business of running a business and collaborates with RIAs to identify ideal partners for long-term success. It encourages an M&A candidate to reimagine what its future business could be. The team deploys a strategic and comprehensive evaluation to explain all options to ensure the decision-making process will add value for key constituents – owners, employees, and clients.
For more information about Advisor Growth Strategies go to: https://www.advisorgrowthllc.com/.
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