Reflections on Year One in the RIA World

I started working with the team at Ritholtz Wealth Management one year ago this week. It’s been a wonderful experience so far to work with such great colleagues and clients. But it’s also been a great learning experience for me, as well. I had never worked for an RIA (registered independent advisor) before. My previous roles were with an investment office, a consulting firm and the sell side so it’s been interesting to see the similarities and differences between the different types of firms.

Here are some of my general takeaways from this first year:

Technology is going to continue to gain prominence in financial services. We talk a lot at our firm about how technology makes it easier to run the practice (especially since we have people working all over the country), but technology on the client side of the relationship continues to evolve and can be a huge asset for firms that know how to integrate it correctly. Technology can make a client or advisor’s life easier but you have to have the right systems in place run by the right people who know how they all fit together. It’s not enough to just a pick a single product, model or service anymore, but building out an entire ecosystem so it can all function together. Tech will play a larger role in communicating with clients, monitoring performance and goals and creating better financial and investment plans.

The next generation is coming. Where improved tech will become a necessity is with younger clients who are a growing presence in our firm. I’m amazed at how many advisors or brokers from the older generations seem to have completely ignored the children of their clients. When that money gets passed down for whatever reason the younger generation is much more educated on this stuff and they understand when they’re not being taken care of correctly. Trillions of dollars will be changing hands in the coming decades and most financial firms are not ready for that transition.

The importance of financial — and life — planning. We have plenty of clients that come to us because they assume they need help with portfolio management. And while that is a huge part of the process, what most people quickly realize is that they really need help with financial planning and how their finances fit into their goals and desires. The best asset management on the planet won’t matter much if the client doesn’t understand how it ties into their own personal situation.

Advisors are looking beyond traditional portfolios. I hear from financial advisors all the time who are trying to find ways to further diversify their portfolios beyond a traditional mix of stocks and bonds. The thing is that most advisors didn’t come up on the investment side. They are financial planners by trade. As liquid alts continue to grow and increase in AUM it’s going to be important for these advisors to understand what exactly they are investing in. I have yet to see many firms who can explain these products in plain english quite yet.

Communication & education are consistently underrated. Investment people who deal with finance stuff on a daily basis take for granted the fact that the majority of the public doesn’t pay much attention to the markets, asset allocation strategies, investment products, the Fed, interest rates, valuations and such. Plenty of people go about their lives never giving these things a second thought. The ability to not only understand this stuff, but also effectively communicate it to clients or prospective clients is a skill that far too many financial firms and practitioners overlook.

Fiduciary duty is mostly an industry worry…for now. The new fiduciary rules seem to be a worry only inside the financial services industry. Most clients either haven’t heard of it or assume looking out in their best interests should be a common practice. There’s still need for better education on this topic.

Bonds & interest rates are starting to worry investors. Most investors typically ignore the bond portion of their portfolio because stocks are more exciting. This is why even bond manager spend so much time talking about the stock market. Stocks are still at the forefront for the majority of investor worries, but bonds are slowly but surely getting more and more people’s attention. I’ve had a number of conversations with investors who are now more worried about bonds than they are about stocks. This is especially prevalent with retirees or those approaching retirement. Fixed income has been a relatively easy asset class to deal with over the past few decades. Advisors need to start paying more attention to this space and have a plan for how to deal with the current rate environment, whether interest rates rise or continue to fall.

People want you to make their lives easier and less stressful. When you outsource to a financial professional you’re generally looking for someone with expertise in a certain area. But most people are also looking to reduce the stress that comes with managing money. Making people’s lives easier is a goal that more financial professionals should strive for.

Fit matters. I’ve discovered that most problems in life come from not having the right fit. Not every client is the right fit for every financial firm and vice versa. Some people aren’t cut out for certain investment strategies because it’s the wrong fit personality-wise. I’ve had the opportunity to work with some amazing people and organizations in the past but I never felt like I found the right fit from an organizational culture perspective. I was personally looking for the kind of firm that I would want managing my money for me and my family. I now have that and finding that fit has been a very rewarding experience.

Check out more here on our 3rd anniversary:
Pondering the Future on Our Third Anniversary (Reformed Broker)

Further Reading:
My Next Step

Now here’s the stuff I’ve been reading lately:


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