A Look at RIA Market Trends for 2023

As we approach the end of the year, it’s a good time to look back and reflect on what’s shaping the RIA market. We’ve experienced some unusual hurdles in the past two years that have had a huge impact on financial advisory trends. 

Here’s how we see these changes affecting your RIA business for the foreseeable future.

What Did 2022 Bring for the RIA Industry?

Over the past year, many factors contributed to changing the current RIA landscape. Looking back, we see five major contributors that precipitated the undeniably and irrevocably altered RIA industry in 2022.

Lingering COVID Impact

COVID threw a wrench in the normal business process for almost every industry back in 2020. In 2022, we saw the continued trickle-down impact of the pandemic keeping us from business as usual. Suffice it to say, the norms have changed.

Now, firms of all sizes have to be nimble and flexible. Advisors must offer continuity across multiple platforms, scale with increased virtual business, organize omnichannel communications, manage their teams virtually, and more. 

The past few years have given advisors a great opportunity to step back and really consider their goals and services. Here is how we’ve seen COVID impact advisors across the board.

• Importance of relationships: Before 2020, many fee-based advisors only met with clients once a year and may not have been very responsive since things were going well. Now, clients are taking a deeper look and moving to a different firm if they don’t like the support or responsiveness of their advisor. Forming a stronger relationship means showing your emotional side and improving your emotional intelligence. You should show the value you bring to the table and take a proactive approach toward client communication. 
• Expansion of services: Investors have sought out trusted advocates during difficult times, and advisors must now offer more than just portfolio management. Clients have been jolted by the pandemic and motivated by crisis to plan for the unknown future. Now, financial advisors help clients set up business services, bill pay, family finances, eldercare, and other integrated services. Many advisors have become a one-stop shop to help consolidate and simplify their clients’ wealth management needs on every level.
• Automation and scalability: For years, advisors were nervous about putting automated systems in place, wanting to remain hands-on and unwilling to adopt new technology. But COVID forced everyone to look toward innovative solutions. While advisors and clients weren’t quick to jump on board, they are now much more comfortable with virtual tools and automation. Advisors are finding they can create a better balance when they use the right tools to support their services. Providers like AssetMark offer turnkey solutions and outsourcing to help advisors focus more on the client and compete with the big players.
• Strategic assessments: It’s hard to carve out time in a busy schedule, but advisors always have to think about what’s working and what’s not. The pandemic gave a lot of professionals a chance to step back and think about where they were headed. AssetMark offers a business assessment and model assessment that helps you specifically pinpoint where you could improve in areas like marketing, client experience, operations, and human capital. We find out where your strengths are and suggest outsourcing in areas where you aren’t as strong.
• True relationships: Most advisors aren’t just looking for revenue generation; they want a relationship with their vendors, custodians, and service providers. COVID made it clear that strong service support was a crucial part of sustainable success.
• Urgency in succession planning: After a lot of sickness and more people preparing to retire, many advisors are worried about the next generation and getting them prepared for the road ahead. We are seeing an increased focus on who will take over the business next and concerns surrounding succession planning.

Looming Recession Talk

Over the past year, there has been a lot of speculation over whether a recession would occur and how bad it might get. Due to those concerns, we need to adapt to clients preparing for a recession, rising inflation costs which influence spending, and impacted investments due to the market downturn.

With so many unknowns ahead and stressors throughout the past two years, clients are understandably concerned about their financial futures. It’s important to help clients focus on their goals and ensure they feel comfortable staying invested in a downturned market. Risk-averse clients are causing advisors to adjust their services.

• Enhanced communication: Who wants to give out bad news or face upset clients? While many advisors were hesitant to take client calls, communication actually helps build trust. When investments are falling, conversations can be tough. One of the biggest reasons that clients leave is because of poor communication. Successful advisors have been restructuring their client strategies to take a more proactive approach toward communication and account advice.
• Diversification: Increased unknowns and risks can be mitigated with a wider focus for investments and wealth planning. Advisors should provide resources and guidance for clients, helping them manage things like growth, time horizons, and tax minimizations. Many advisors find it valuable to understand ESG investing and offer potentially lower-risk options that align with client priorities.
• Budgeting: With risk-averse clients, layoffs and inflation are major concerns. Advisors must offer more than investment management and help clients with cash flow and budgeting concerns. This year’s trends include helping clients consider how they are looking at monthly net income, rising costs for necessities (like fuel and food), tuition for their kids, making their mortgage payments, and saving for retirement. Smarter planning can help soften the blow of a tough economy. 

Digital Migration

The entire industry essentially went virtual overnight due to COVID restrictions and lockdowns. In 2022, we did not see a return to business as usual. Instead, advisors are onboarding and converting prospects that they’ve never met in person, changing them into loyal clients.

Advisors use online advertising and a virtual presence to help draw in new leads. While clients were once nervous about using online portals and virtual conferencing tools, it’s now become the norm. As many areas opened back up for in-person, the RIA industry has taken on a more hybrid approach, with many virtual meetings and emailed communications.

We’ve seen more investors interested in a digital portal for 24/7 account access. Advisors have turned to digital tools and platforms to help them keep up with larger firms. The changeover to digital has been fast and revolutionary for the industry.

Compliance Changes

Finally, another change that impacted RIAs in 2022 stems from major changes in compliance.

• Marketing rule: For the first time in 60 years, the SEC Marketing Rule is changing. RIAs were not allowed to use testimonials, but recent changes have opened the door for soliciting reviews and using ratings on 3rd party review sites. While this could be a great marketing opportunity, advisors must follow provisions carefully, ensure nothing is misleading, include new required disclosures, create compliant reports, and understand the rule limitations.
• Proposed outsourcing rule: The newly proposed rule could hurt smaller RIAs who are trying to stay competitive. There is a fear that RIAs may put too much responsibility on outsourced vendors without proper due diligence. While the rule still needs clarification on involved parties and expectations, RIAs need improved risk analysis and competence monitoring to check their outsourcing firms.

Top RIA Industry Trends in 2022

Based on what advisors experienced in 2022, the major trends of this past year largely involved transformative technology solutions, relationship building, and succession preparation. Here are some of the specific trends we saw over the past year:

• Offering comprehensive wealth management services that go far beyond investing
• Showing a value of services with increased communication, a transparent service menu, and a tiered pricing structure
• Offering client portals and apps for easy access to account information in one place
• Incorporating video conferencing and hybrid services to increase flexibility and reach
• Targeting niche audiences, like small business owners, corporate executives, and widows
• Attempting to get new talent in the space for succession prepping and continuity
• Improving operational efficiency with technology and talent retention
• Building professional interest among underrepresented, minority groups for the next generation of advisors

Continuing Challenges and Trends in the RIA Landscape

There are several 2022 RIA challenges and solutions that we expect to continue into 2023. Here are some of the top things we believe will remain a key part of the financial advisor’s role.

• Leveraging technology to stay relevant and optimized. Harnessing modern tools to help differentiate your businesses in the RIA landscape.
• Staying connected with clients and reaching out regularly to offer advice and insight before they ask for it
• Attracting new investors while retaining existing clientele for sustainable growth
• Strong branding to help build up a visible presence both online and in person
• More flexibility and efficiency, using digital solutions to spend less time on administrative tasks and offer clients more choices
• Driving trust and loyalty with clear communication on the value of services provided
• Scaling and improving the tech stack to optimize spend and improve positioning
• Bringing the next generation to the conversation to help with wealth transitions. Focusing on all involved parties and not just the current decision maker

How Can RIAs Prepare for Industry Challenges in 2023?

So, how can advisors get ready for the upcoming year? Here are four ways you can set yourself up for success.

Create a Written Marketing Plan

Get your strategies for growth down on paper — don’t keep them in your head. This should include addressing questions like:

• What is your value proposition? Identify your key client profiles and learn how to leverage your digital center of influence to stand out as a top choice for your audience.
• How are you educating clients? Establish your plans for staying the course and shedding expert light on new investing trends and concerns—whether altcoin and cryptocurrency, or ESG investing.
• How will you connect? Determine whether you will keep your office space or have a hybrid setup. Clearly define how often you will reach out to clients and how they can quickly get answers to their questions.
• What emotional draw do you have? Today, advisors do much more than just offer expert advice on investments. You need to determine how you attract people emotionally and assure them they can trust you. This emotional connection includes really listening to your clients and understanding their primary concerns.

Read more in The Ultimate Guide to Financial Advisor Marketing and The 6 Biggest Marketing Mistakes of Financial Advisors and What to Do Instead

Build a Modern Client Strategy

How are you bringing in clients to keep your business growing sustainably? The modern client strategy eliminates geographic constraints because of the tools available to support virtual connections. You are no longer limited to the community around you — the world is your oyster.

Advisors should also eliminate outdated approaches that exclude household members in the relevant discussion of family wealth management. Modern advisors are including the wife and adult children of the primary account holder in the discussion about investments and financial decisions. It’s crucial to listen to the next generation’s goals and concerns if you plan to continue with the account after the transfer of wealth.

Finally, it’s crucial that you understand the fears of your clients for a truly modern strategy. During uncertain times, advisors must be supportive and steadfast for their clients. Don’t avoid hard conversations because your clients might act on impulse instead of sound investing logic. AssetMark even offers a Market Volatility Guide and webinars to help you navigate these difficult conversations.

Read more about 5 Key Elements to a Financial Advisor Business Plan and 5 High-Impact Tips to Grow Your Practice When You Feel Overwhelmed

Get a Business Tech Assessment

Business owners are better when they aren’t stretched between every task. AssetMark helps you reduce your workload so you can focus on the most pressing concerns facing your business. 

Tools like AssetMark Marketing Advantage and AssetMark WealthBuilder℠ can help you build trust and broaden your client base. With so many available tools, sorting through the possibilities to build a cohesive tech stack can be an overwhelming task.

Get an AssetMark tech assessment to see what tools could help you streamline your services or offer more robust solutions. We do our due diligence to suggest the best tools from cutting-edge providers, helping you access the right technology to support your business. 

Read more in The Simple Guide to the Financial Advisor Tech Stack

Improve Practice Management

Finally, get ongoing professional support to help you stay on top of industry changes. Work with an AssetMark business consultant to examine your fee structure, operational efficiencies, outsourcing opportunities, expansion, and more. Our Advisor Acceleration Academy and Leadership Advantage programs are examples of how we help advisors grow their businesses.

You can provide high net-worth solutions and navigate market volatility with our team backing your every move. We help simplify the buyout or succession process — no matter how far out that is for you. With our help, you can focus on your future and the needs of your clients.

Ready to get started? Reach out to our team today to take the first step.