8 Ways the Advice and Investing Worlds Are Changing Now

2. Clients want more services.

Clients want as many services under the same roof as possible, Oros said. This includes traditional wealth management, taxes and other services. He views this as a positive development, allowing advisors to deepen their client relationships.

Clients are also looking for sophisticated estate planning — more than just a trust and a will, he said. They want the kind of thorough consideration of tax efficiency and legacy that requires a real emotional bond between advisor and client.

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3. RIAs are getting larger.

Those who have been around for 20 years or more could never have imagined a $100 million RIA, said Oros. He thinks that a $1 trillion RIA is possible in the next several years.

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4. RIAs can stand out by finding a niche.

All advisors think they are different, Oros said, but if you look at a number of advisor websites you will see a lot of commonality. He suggested that picking a niche is a good way for advisors to differentiate themselves.

He cited the example of an advisor who became an expert in divorce. This advisor not only got the right certifications but also went to court daily to listen to what was said in divorce cases, allowing her to talk to clients and prospects from a place of credibility.

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5. Private fixed income investments are proliferating.

The privatization of parts of the fixed income markets is in its early days, Koch said. While many asset managers are using private credit, she noted that TCW is able to differentiate itself with a 25-year track record in this area of fixed income.

She added that TCW is very covenant-heavy in private fixed income, unlike many competing fixed income managers.

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6. A rise in private credit defaults is expected.

Normally, Koch said, in an environment where interest rates have increased from practically zero to around 5%, you would expect to see a number of defaults in the private credit arena. Defaults, though, have gone down year to year.

Why? Chalk it up to “amend and pretend” deals in which maturity dates are extended for a fee. The number of these deals increased three to four times in the past year, Koch said. She referred to these as delayed defaults and expects an increase in defaults in private credit.

Investors and financial advisors should look for fixed income managers with experience in the private credit sector to help guide them through this rise in defaults, Koch said.

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7. Private equity firms are seeking to reach RIAs’ clients.

A number of big investment managers like KKR and Apollo are putting in major efforts to gain access to retail investors through RIAs, Oros said. These investments, once only available to institutions and accredited investors, have never been more accessible to retail investors, he said.

Many of Hightower’s clients, Oros said, are ultra-high-net-worth investors who made their money through investing in a single asset. These investors have an appetite for thematic investing and are not necessarily looking to invest through a 40 Act mutual fund. Hightower recently launched a cybersecurity fund in conjunction with an outside manager that has drawn a lot of interest from some clients, he said.

Why are private equity firms eyeing up RIAs’ clients? These firms see a big opportunity for growth, Oros said, pointing out that some of these firms have dedicated as many as 100 people to building out this market.

Koch mentioned that her firm will be bringing some of their alternative investing capabilities to the wealth management market through both existing structures and dedicated offerings. The hardest part of this process, she added, is figuring out the type of vehicle and structure that is acceptable to the wealth management market as a whole.

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8. Despite consolidation, there’s plenty of opportunity to specialize.

In response to an audience question on consolidation, Oros said that although there are many announcements of RIA acquisitions and consolidation, smaller, more focused wealth advisors still have a place.

On the active management side, Koch said that as investors seek to capture new technologies, they will continue to look for managers who are on the leading edge of the markets.

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