Optics for the Registered Investment Advisor industry don’t look great. A growing number of younger consumers are shunning professional advice, and the emergence of artificial intelligence only casts a further shadow as technology threatens to eclipse human advice. Despite these stiff winds, one firm continues to expand, largely by M&A, and expects to continue along just fine.
Overland Park, Kan.-based Creative Planning continues to expand despite macroeconomic challeges. CEO Peter Mallouk has expanded the team’s assets under management from $100 million in 2004 to $245 billion, making it one of the largest RIAs today. Last month, it agreed to add Goldman Sachs’ Personal Financial Management (PFM) unit to its long list of acquisitions. Earlier this month it acquired Kistler-Tiffany Advisors of Berwyn, Pa.
This expansion comes in the face of a growing number of young people shunning the industry. Four in five Millennials (born after 1981) and Gen Z (born after 1997) consumers now look to social media for financial advice, according to a recent Forbes Advisor survey. Some young adults are skipping human advice altogether. A fifth of Gen Z adults told Yahoo Finance/Ipsos that they would consider using artificial intelligence tools for financial advice.
The industry of providing financial advice is also less appealing to younger people. Less than 30 percent of certified financial planners are under the age of 40, according to the CFP Board. The lack of young clients and advisors could be a challenge to the industry. Some have turned to mergers and acquisitions to solve this issue.
For Mallock’s team, age is just a number.
“At the individual deal level, acquisition targets have to be the right fit for us,” says Jamie Battmer, chief investment officer at Creative Planning. “Peter’s dad practiced medicine into his 80s. My dad is still practicing medicine in his 80s. They can run circles around younger colleagues. So that informs our criteria. We’re seeking the right fit (for RIA acquisitions) no matter what their age.”
According to Fidelity, 90 percent of firms that acquired a registered investment advisor (RIA) said talent acquisition was the top reason for their purchase.
Battmer sees a higher interest rate environment as an opportunity for advisors.
“Unfortunately, for a lot of investors, they arbitrarily look at bonds as conservative,” he says. “We all know that’s not the case. In fact, they can be even more risky when you see the ‘perceived instruments of safety’ go down.”
Battmer points to the complexity and opportunity around high yield as another advantage for RIAs. ”
“These instruments have volatility that is typically more prudent for the equity side,” he says. “If anything, this increases the need for professional, high-quality guidance because we now have opportunities we haven’t seen in 15 years. Conservative assets now offer yields as high as 5 percent, 6 percent, or 7 percent.”
Uncovering these genuinely conservative assets with low risk is where an advisor can add value and stay relevant in a rising rate environment, according to Battmer, and that is why his firm continues to scout for acquisitions.
Contact Battmer at [email protected]
