Financial Planning Listicle

Happy holidays from Citywire! Thank you to all our readers for subscribing, reading, and getting in touch.

The Citywire RIA team will be taking a break until January 2021. But we’re sending you off in style, with predictions from some of the industry’s top leaders on what 2021 may bring.

Enjoy — and we’ll see you next year!

If you go back and look at other health crises, you learn that coming out of them, people had a lot of pent-up demand to do the things they couldn’t do.

Go look at luxury hotel prices today, and compare the price of booking a room this weekend to booking one next September or October. Go look at airline fares today, versus next September or October. They’re dramatically different.

If you think about 1918, in the pandemic, what followed that was the Roaring Twenties. It was people wanting to be out and about, and to be a little bit spendy. People saved a lot more money than usual through this pandemic, so there’s a higher savings rates, and a feeling of people wanting to be out. I think you’re going to see a significant bounce-back in 2021.

Consolidation in our industry and exodus from the wirehouses will continue. There are so many solutions for advisors and they are becoming more educated about their options. In addition, competition among firms looking to acquire will heat up and likely flush out some of the firms that are not fully committed to the process.

Clients will continue to ask for more from advisors, including more services around the aging client, as well as more in-house professional expertise to reduce the complexity and enhance the client experience. In addition, advisors will begin to have greater discussions with their clients surrounding their healthcare.

Money will be in motion during 2021. While certain advisors have shined in this challenging time, others have been exposed for the lack of value or service they are providing. The days of providing asset allocation and basic financial planning calculations are over, and this period of time will only accelerate the rate at which advisors need to adapt and offer more.

On the social side, divorce rates will continue to rise. Couples spending an enormous amount of time together (as well as other family members), coupled with a great deal of financial, social and healthcare stress, is putting pressure on marriages and causing the divorce rate to continue on an upward trend.

More people will consider relocating. Prior to the pandemic I would’ve said the high cost of living and taxes were the primary driver for many considering relocation. While I believe those are still important factors, I also believe personal interaction and family circumstances will continue to accelerate this desire.

Employers will provide associates greater flexibility than ever before in terms of where they work. This year has proven that if you have the right talent and structure in place, working from the office is not critical. Firms will need to review their policies to stay competitive. In turn, this also provides a larger talent pool for employers as geography will be less of a constraint than it has been in the past. Employers will have a greater focus on employee engagement, culture and diversity going forward.

I think we’re going to see M&A activity pick up in a big way. I think there are going to be a lot more transactions than we’ve seen before. I think it’s going to speed up because the aging demographics combined with the high market, the high multiples, the low tax environment and the wake-up call that we all received from Covid will cause the floodgates to open even wider. I think it could be our biggest year ever in the M&A market of wealth management firms and RIAs.

When we find the right transactions, we will do them. We are not in a hurry. It is not our primary business model, so we aren’t facing any obligation from the board or any timeline to do a certain number of deals or generate a certain number of acquired assets in a certain time frame. We are able to be opportunistic and we will do a transaction that is right for us, right for the firm that we are examining and right for all of the clients and employees of both organizations. But I would expect that there is going to be M&A in our future.

I think we’ll continue to see consolidation, but I actually think the consolidation will not be limited to RIAs. I think we’ll see consolidation among technology providers and among custodians. Certainly, we’ve seen this already with Charles Schwab and TD Ameritrade and E*Trade and Morgan Stanley.

The next topic, in addition to consolidation, would be more competition. I don’t just mean more competition among RIAs, I mean competition coming from unexpected competitors and in different ways, including, for example, Goldman Sachs becoming an RIA custodian. That’s interesting.

I think that you will see more breakaways, but the breakaways we’re seeing are bigger firms and I think you’re going to see more consolidation of the industry in that sense. And I think you’ll continue to see a focus on diversity in advisory firms. I think you’ll see an increase in those numbers.

I think what changes for advisors in the year ahead is that the experience they will need to step up to deliver will have to be as robust as it has ever been. This is positive evolution — for the benefit of clients, for the advancement of advisors, and for firms needing to further empower advisors to design, build and protect their financial lives.

It is my hope this is when we see the bona fide end to clients receiving only an investment advisor experience, and we will see real momentum across our profession to deliver a true wealth management experience.