Last week, Taryn Burgess, Matt Crow, and I exhibited at CFAI’s Wealth Management Conference in Los Angeles. The conference was well attended and lauded by most everyone there (most of whom were wealth management professionals at RIAs in the major metropolitan areas along the East and West Coast, unlike us).  A lot of topics were discussed, most of which centered around financial planning, practice management, and servicing private clients with evolving needs and return requirements.  Though we weren’t able to attend all the sessions, we did pick up on a few themes from our discussions with the attendees and other exhibitors:

1. CFAI appears to be placing more emphasis on wealth management strategies and private clients. When I was studying for the CFA exam (2006-08), the curriculum seemed to be more geared towards portfolio managers and research analysts.  On the buy-side, the emphasis was on the asset management sector and investment strategies for institutional clients.  While there was some focus on wealth management and private clients, more of the curriculum seemed to be devoted to portfolio management for pension funds, insurance companies, endowments, and the like.  One of the conference speakers noted that this was likely due to the rising demand for wealth management services and the corresponding decline in active management (and those serving the industry).  We’ve seen a fair amount of asset managers jump ship for the private client side to take advantage of this trend.  It will be interesting to see how their transition shakes out since, in our experience, the cultures and skill sets of asset management firms versus private client RIAs often seem completely incompatible with one another.  In any event, many of the CFAI folks we talked to at the conference noted that the institute is starting to place more emphasis on the wealth management side, and conference attendance continues to rise with the industry’s popularity.
2. Understanding behavioral finance is a key competitive advantage for wealth managers over their robo-advisory rivals. Many of the sessions were devoted to understanding private client’s behavioral tendencies and the proliferation of robo-advisors competing for their business.  It appears that most wealth managers are acknowledging the emerging competitive threat of robo-advisory firms, especially with millennials and younger clients.  Touting the ability to hand hold and have face-to-face meetings with clients is no longer sufficient to ward of the robo-advisory threat, and many wealth managers are turning to behavioral finance to better understand their client’s needs in ways that AI falls short.  It’s not inconceivable that, moving forward, many financial advisors will have degrees in personal psychology to better their understanding of client behavior and cognitive tendencies.  Several speakers discussed new research and developments in the study of behavioral finance and how their firms were using these advancements to communicate with their clients more effectively and help them realize their financial goals.  Once rejected by many industry participants, behavioral finance is increasingly becoming a point of emphasis for continuing education at wealth management firms across the country.  We would not be surprised if CFAI made this a higher priority in future curriculums.
3. Everybody’s asking about sector M&A (or lack thereof). We’ve blogged about this before and don’t think any of these dynamics have changed (though there has been somewhat of an uptick in recent years).  While there weren’t any conference sessions devoted to this topic, most of the questions we got at our booth were about RIA dealmaking and sector consolidation.  Since it was a wealth management conference, there was a lot of interest in what Focus Financial was up to and we can only surmise as to what’s going on there since it remains closely held.  What we do know is that it’s never too early to be thinking about how to maximize your firm’s value even if it’s not for sale.  This means cleaning up your P&L (and possibly balance sheet), making the necessary investments in technology, transitioning client relationships to the next generation, and having succession planning discussions with junior partners.  We can help with the value part (and potential sale), but there may not be much to transact if you haven’t started thinking about some of these topics.

The conference was informative and productive.  Hopefully, we’ll see you at next year’s event in Fort Lauderdale.