Net flows pose huge challenge for RIAs, advisor says
One of the biggest potential problems Thomas West foresees for the future of the RIA space is organic growth.
“Net flows are a big problem in the industry,” said West, a senior partner at Signature Estate & Investment Advisors, an independent firm. “The issue with net flows, a lot of times, is after the first investor gets sick or dies, the industry or individual firms do a really crummy job of holding onto those assets. It’s affecting net flows, and it’s affecting organic growth.”
In addition, given how much client-based revenues could potentially drop as the years go by and everyone ages, West added, advisors need to ask themselves, “What am I going to be doing to replace that?”
“Advisors need to have a plan and the way to start the plan is become very aware of what your book looks like five years and 10 years from now, and respond accordingly,” he said.
West, who is also founder of the Lifecare Affordability Plan, thinks the big challenge for RIAs is “What are we going to do about organic growth when we can’t hold on to the household after the death or disability of the primary relationship? I think there’s going to be different winners and losers in the RIA space based on their ability to answer that question.”
West’s firm, SEIA, covers everything in the wealth management space, from 401(k)s to families in transition and cognitive care.
West said the Virginia-based firm sets itself apart from other RIAs or niche practices simply because it offers differentiated expertise. When health circumstances change priorities, there will also be a change in how financial decisions need to be made, he said, especially when it comes to the onset of a chronic illness.
“Families sometimes aren’t even aware that some of their hopes,
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