The Advisor’s Dilemma

By Jeff Gitterman

In my travels to various conferences and my connection to many RIA firms, I keep hearing an increasingly familiar story. “The growth of my practice is shrinking due to market declines and the passing of my clients as they age, and it’s the first time in years that I have to market for new clients.”

A firm’s future valuation can be impacted if these observations go unaddressed.  2022 brought a ten percent increase in RIA acquisitions,¹ yet declining asset growth at the firm level over the same timeframe reveals the advisor’s dilemma.  The median age of an advisor is on the rise,² and sadly, as the clients of these advisors also continue to get older, their mortality rates will increase, while the retention of next generation heirs tends to be very poor.³

I often hear from other advisors that either their technology platform or investment options don’t meet the needs of the heirs of their clients, who in general are much more interested in values-based investing.⁴  Add in increasing complexity due to product proliferation, changes in technology, and regulatory overload, and it is clear that the present-day advisor faces numerous challenges retaining the next generation of clients.

Unified Managed Accounts (UMAs) have the potential to simplify investment management and give time back to advisors, while also providing attractive features that next generation clients can find appealing enough to stick around. As examples, UMAs allow a client to own their own cost basis, which can be attractive to heirs inheriting a stepped-up basis, and are housed under a single contract to simplify the account opening process.  Additionally, our UMAs offer values screens, ESG diligence, and a focus on the risk and opportunities inherent in the marketplace due to climate change, which is often an expressed interest to a variety of investors, and offer the potential to solve many of the above pain points.