Why High-Net-Worth Investors Prefer to Work With RIAs

The past year has seen a significant shift in the way we live and work. It has also led to unprecedented market volatility. As a result, more high-net-worth (HNW) investors are looking for financial advice and many are turning to independent Registered Investment Advisors (RIAs) for guidance.

This increased popularity is a major opportunity for advisors who can leverage the benefits of the RIA model. Below we’ve outlined some of those benefits and how advisors can make the most of them.

Increased Flexibility Allows RIAs to Put Clients’ Interests First

Perhaps the biggest reason high-net-worth investors are keen to work with independent advisors is their ability to build strong personal relationships. The RIA model is uniquely suited to this, providing advisors with the freedom to design the type of client experience they want and build client relationships on their terms.

According to Cerulli Associates, this has played a key role in independent advisors’ ability to grow their presence within the industry. In fact, in recent years RIAs have notably increased their market share with HNW investors and currently manage more than $2.5 trillion in assets.¹

“Our independence benefits clients every day because I can act on their needs, their instructions, and what’s going on in the world around us,” says Karen McCloskey, principal and founder of CMH Wealth Management in North Hampton, New Hampshire. “I can make that adjustment without having to go and get layers of approval.” In turn, this flexibility translates into an ability to pivot quickly and respond to shifting client needs.

Transparency Enables Advisor-Client Trust

Many independent RIAs cite the fiduciary standard as one of the core reasons they have been able to build trust with their clients. While the fiduciary standard has played a crucial role in the way RIAs operate for decades, it has become even more important in recent years

“One thing we do is lead by example,” says Dan Moisand, principal and financial advisor at Moisand Fitzgerald Tamayo, LLC in Orlando and Melbourne, Florida. “We don’t just talk about financial planning; we actually do it. We don’t talk about acting in our clients’ best interests. We put ourselves on the hook legally to do that as fiduciaries at all times. Period. No exceptions.”

This approach has led to overwhelmingly positive results for Moisand and his team. Over the past two years, they have benefited from a significant uptick in referrals with 55% of clients referring new prospects.²

Adherence to the fiduciary standard goes hand-in-hand with transparency and, for many clients, transparency can make all the difference. A recent report from Schwab Advisor Services found that 17% of high-net-worth investors said it was critical for an advisor to offer a transparent fee structure.³

For independent RIAs, this type of fee structure is much easier to implement than it is with other advisory models, leading to a greater sense of visibility about costs and services. “There’s a lot of distrust in the industry,” says Jason Snipe, CEO of Odyssey Capital Advisors. “We believe in being upfront and transparent. We talk to people in terms they understand to keep things as clear as possible.”

Comprehensive Services Promote Long-Term Relationships

Robust service offerings are another reason why RIAs continue to gain popularity. In addition to portfolio management, many independent advisors also offer a wide range of specialized services including tax management, long-term healthcare planning, and property management. This integrated approach speaks to the key concerns of HNW investors and promotes stronger advisor-client connections.

Research has shown that 97% of RIA clients are looking for advisors who take the time to understand their specific financial situation including their needs, goals, and risk tolerance.⁴ The type of attention they receive from independent advisors increases the chances that they will stick with their advisors as they move into the next stage of their lives. It’s also one of the reasons that independent RIAs have grown 10.4% over the past five years, and why this trend is likely to continue in the years to come.⁵

The COVID-19 pandemic has presented new challenges and opportunities for investors, and it has changed the world in unprecedented ways. With uncertainty continuing to be an ongoing issue, firms that act with agility and transparency are likely to fare better in the months and years to come.

If you’re considering going independent, Schwab Advisor Services could help you move your business forward and offer you the resources you need. For a deeper dive into why RIAs are leading the way in the advisory industry, and how Schwab Advisors Services is contributing to that shift, check out “Mastering the moment: Why RIAs own the future.”

¹ The Cerulli Report, U.S. High-Net-Worth and Ultra High-Net-Worth Markets: Implications of Wealth Concentration, p.31, Cerulli Associates December 2, 2020.

²Charles Schwab, Mastering the Moment: Why RIAs Own the Future, 2020.

³Charles Schwab, High-Net-Worth Advisor Choice Research, June 2019.

⁴Cerulli Associates,The Cerulli Report, U.S. RIA Marketplace 2019: Consolidators Gain Momentum, Exhibit 5.11, November 13, 2019.

⁵The Cerulli Report, “U.S. High-Net-Worth and Ultra High-Net-Worth Markets: Implications of Wealth Concentration,” Exhibit 2.03, Cerulli Associates December 2, 2020. Accessed September 22, 2021.

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