Data & Research September 24, 2014

A Look Inside the Minds of RIAs

A new Schwab Advisor Services study explores industry attributes that attract professional financial advisers to the registered investment adviser (RIA) profession.
Reported by

Schwab says the study is based on a first-of-its kind survey of nearly 600 advisers, who were asked about their career paths and their perceptions of what it is that attracts advisers to the RIA approach to financial services. Advisers polled for the survey suggested a variety of factors played into their decision to go independent, especially relationship-based client interactions, ability to contribute to firm growth, and potential for greater work/life balance.

“By understanding the career paths of advisers, as well as the aspects of the profession that draw new talent to it, RIA firms can better prepare for and capture the many opportunities ahead,” explains Neesha Hathi, Schwab Advisor Services senior vice president. “Our study results indicate that independent advisers indeed value the attributes that have become the industry’s hallmarks.”

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Hathi also points to encouraging survey results showing younger advisers are being drawn to the RIA profession for many of the same reasons as their older counterparts—and to take advantage of what Schwab calls the “tremendous growth opportunities present in the RIA industry.”

Becoming an RIA

Schwab says about one in three (32%) of the advisers surveyed first heard about a potential career in the RIA industry from a colleague or friend, and most advisers working as RIAs had other jobs first. A combined two-thirds report that their current position as an RIA is their second (43%) or third (21%) career.

When considering their career options, more than half of the respondents report having looked at other investment-related firms (including wirehouses and brokerage firms) prior to choosing a position at an RIA firm. Schwab researchers say this is particularly true of advisers younger than 40. Thirty-five percent of advisers younger than 40 considered a wirehouse firm before working at their current RIA firm, versus 26% of those ages 40 to 50, and just 11% of those older than 60.

Prior to their current RIA role, approximately half of both men (55%) and women (48%) advisers held a position as an adviser at another financial services firm. Women, however, are more likely than men to have worked at other RIA firms (38% vs. 27%). Men are more likely than women to have also had roles in sales (38% vs. 15%) and trading (35% vs. 16%), while women more often held previous positions in operations (34% vs. 17%) or administration (23% vs. 14%).

Being an RIA

Schwab’s poll found the most important reasons reported for being an independent adviser include working for a smaller company (49%), greater work/life balance (47%) and greater earnings potential (41%). However, advisers younger than 40 also report being attracted by the opportunity to contribute to firm growth (55%) and the opportunity for greater career advancement (47%).

Three quarters of advisers (76%) indicate having a long-term commitment to the RIA industry, and the majority (58%) believes the profession offers more challenges and opportunities for growth and learning when compared to other types of models in financial services.

When it comes to skills that drive success in their roles, RIAs commonly cite a strong work ethic (44%), a solid ability to build and nurture relationships (35%), and the ability to develop the business/grow clients and assets (31%). Women are more likely than men to emphasize the importance of building/nurturing relationships (46% vs. 33%) and being well-organized (32% vs. 19%). Men are twice as likely as women to consider networking critical to success (16% vs. 8%).

Ninety-three percent of advisers indicate that improving the financial well-being of their clients is an important benefit of their RIA career. This is followed closely by having the authority to make decisions (81%), and having close and ongoing relationships with clients (79%). The majority of the advisers surveyed believe they are able to enjoy these outcomes in their current position as an RIA, Schwab says.

Career Management

Independent advisers report that their firm actively invests in, and provides support for, their individual career development. This includes informal on-the-job training for the majority (70%), while relatively few report access to formal in-house training (10%). When seeking new adviser talent, Schwab says networking is a dominant means by which firms find qualified advisers (60%), followed by cultivating talent from within (32%).

Recruiting

When it comes to recruiting policies that encourage a diverse workplace, 69% of RIAs consider the industry to be about equal with other types of financial services firms. About half (49%) feel the RIA profession provides appealing career opportunities to a diverse talent pool when compared with other types of financial services.

“For today’s independent advisers, identifying, attracting and cultivating diverse talent who understands and values relationships is a strategic business imperative,” Hathi says.

Complete results from the Schwab RIA Talent Study can be downloaded here.

The Markets September 24, 2014

Investors Say Caution with Stocks is Wise

Investors deem caution towards the stock market as wise, and Social Security is key to retirement confidence, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index.
Reported by

A new Wells Fargo/Gallup question this quarter asked investors whether they think caution toward investing in the stock market is “wise because it protects people from possible market losses,” or “unwise because it prevents people from realizing significant market gains.” Sixty percent of all investors say such caution is “wise” in this respect, while 37% call it “unwise.”

In the poll, 68% of investors say they “actively choose stocks for their long-term investment accounts,” but almost one-third (29%), say they “consciously avoid stocks in long-term investment accounts.”  Forty-two percent of those with less than $100,000 in assets say they “consciously avoid stocks in long-term investment accounts,” versus 20% of those with more than $100,000 in assets.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Of the 29% of all investors who say they consciously avoid stocks, less than half (41%) feel confident they can reach their financial goals without stock market exposure. The majority (56%), say they are not confident they can reach their financial goals without taking on stock market risk, but they still think it is better to avoid that risk.

While most investors say they actively choose to include stocks in their long-term investment accounts, they may not be allocating enough to stocks, Wells Fargo says. On average, investors say 38% of their retirement savings are invested in the stock market. Naturally, this is lower among retirees, at 33%, but not much lower than among non-retirees, who say they have 40% invested in stocks.

In contrast to the common recommendation that investors scale their exposure to the stock market by age, the survey finds little difference in the average percentage of retirement savings that investors of various ages say they have invested in the stock market. This average is 33% among all retirees, 39% among non-retirees ages 18 to 49, and 41% among non-retirees ages 50 to 64. 

Role of Social Security in Retirement Confidence

Taking their savings and Social Security income into consideration, a majority (69%) of investors say they are “highly” or “somewhat” confident they will have enough money to maintain their desired lifestyle throughout their retirement years. However, nearly half (46%) are “very” or “somewhat” worried about outliving their savings, including 50% of non-retirees and 36% of retirees. Retirees who run out of money could become entirely dependent on their Social Security checks.

“Clearly Social Security plays a key role in thinking about retirement income, and concerns about the government’s ability to address the system’s financial problems exist for  both retirees and non-retirees,” says Karen Wimbish, director of retail retirement at Wells Fargo.

Six in 10 (58%) do not think federal lawmakers will address the financial problems with Social Security in time to preserve the system for future retirees. Two-thirds of younger investors (67%), those younger than age 50, are especially pessimistic, saying lawmakers will not fix the system. These same investors are also much more doubtful than older ones that they will ultimately receive their full or even slightly reduced Social Security benefits in retirement. A little more than one-third (38%) of investors between the ages 18 to 49 believe they will get most or all of the benefits due to them under the current system, compared to 71% of those between the ages 50 and 64, and 73% among those 65 and older.

Despite these divergent perceptions about whether Social Security will be there for them in retirement, non-retirees on average expect Social Security to account for 26% of their annual retirement income, while retirees, on average, report that it currently accounts for 30% of their retirement funding.

More information about the Index is here.

«