Regardless of what the pandemic will bring, or not bring, in 2021, the wealth management industry has been changed forever.
Everyone is excited to turn the page on 2020. With several recent headlines surrounding the success of multiple COVID-19 vaccines, the country (and the world) can see the light at the end of the tunnel as we all hope to restore a sense of normalcy in our everyday lives. Despite the optimism, here in Los Angeles, coronavirus cases are at all-time highs (over 6,000 new cases per day), a 10 p.m. curfew has been reinstated for the first time since the beginning of the pandemic, and all indoor and outdoor dining has been shut down. All of this is occurring before we even see the impact of holiday gatherings throughout the month of December. Regardless of what the pandemic will bring, or not bring, in 2021, our industry has been changed forever. Here are some predictions for how 2021 will be different:
Professional Management Will Finally Have Its Moment
We have done our best to promote the notion of professional management within the RIA industry for several years now, trying to overcome the over-arching belief by RIA owners/advisors that anyone not responsible for business development is a “cost center” and therefore expendable or, not needed at all. One silver lining coming out of the business disruptions caused by COVID-19 throughout 2020 is the fact that those in charge of improving the business, finding efficiencies and promoting productivity, will have a much louder voice within their firms in 2021.
I interviewed Eric Hehman, CEO of Austin Asset, in April this year and he had this to say about the impact the coronavirus has had on professional managers’ standing within their firms: “I think it’s a big positive for anyone that’s running a firm right now that’s maybe behind the scenes that felt like they weren’t in the business development office or they weren’t in the strategic office, but they were in the back looking for ways to make the firm run better.” RIA owners are now prioritizing business efficiencies and profitability like never before, which will give professional managers within their organizations a much larger platform to affect change in 2021.
RIAs Can Draw from a Larger Talent Pool Not Constrained by Geography
Regardless of whether COVID-related remote work continues deep into 2021 or not, over eight months of working from home has opened all of our eyes (and our minds) to the fact that business can and does get done regardless of physical proximity to our employees. 2021 will undoubtedly find more RIAs open to hiring employees in other locations, who will not be expected to physically work in the office with their co-workers.
PFI Advisors can speak to this realization directly—prior to 2020, we never intended to hire an employee that would not physically sit in the office in Los Angeles, but after six months of working from home, we went ahead and hired an employee who will work full-time from Louisville, Ken. Overall, we can confidently say remote work (in some capacity) is here to stay!
RIAs will focus on the quality, not the geography, of potential employees in 2021, which drastically increases the talent pool for all of us.
Business Continuity Plans Will No Longer Be a Nebulous Concept
In the past, most RIAs treated their business continuity plan simply as a compliance document required by the SEC. Unless your RIA is located in hurricane zones or earthquake country, many advisors never thought much about the possibility of a natural disaster. And no one planned for an event that would cause every one of their office locations to be simultaneously inaccessible.
As opposed to a “check the box” document sitting on a shelf, every RIA has been forced to test their business continuity plans. Some major components seen throughout a firm’s BCP will now be part of any ongoing business operations planning:
- Fail-over technology such as Virtual Private Networks (VPNs) and secure backup internet lines.
- Server-based applications versus cloud-based programs
- Improved internal communication tools, as we no longer rely on dropping sticky notes on each other’s desks
2021 will not only see an upgrade in technology tools leveraged by RIAs, but more robust communication tools among teammates as well.
Another Record-Breaking Year for M&A Will Force More Buyer Preparation
The pandemic did not slow the frenzied pace of M&A activity across our industry in 2020. As we seem to say every year, more sophisticated buyers entered the space, making competition for acquisitions red hot. Firms hoping to complete an acquisition in 2021 will no longer be able to rely on a haphazard “if the perfect seller comes along at the right price, we’ll make a deal” approach. The onus is on the buyers to convince sellers they have the right technology infrastructure, the right people and the proper onboarding workflows and processes to allow sellers to not only transition their clients, but continue to grow their practice after they join the larger organization. Firms without a dedicated operations team, a robust investment platform and state of the art client-facing technologies will not be able to compete for inorganic growth in 2021.
2020 was exhausting on so many levels, and there is still plenty of uncertainty heading into 2021, but the craziness of this year proved to everyone, including ourselves, how resilient our businesses truly are. 2020 forced all of us to adapt to life during a global pandemic, however it also allowed us to take the necessary steps to improve our business operations to best serve our clients in the years to come. Despite what external forces are thrown at us next year, our businesses will look drastically different—for the better—in 2021.
This article originally appeared in WealthManagement.com.