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2020 Financial Services Industry Trends

The Data Possible Podcast

Episode 6: 2020 Financial Services Industry Trends

Guest: Craig Katz, EVP, Partnerships & Strategy, Discovery Data

Summary: 2020 was an extraordinary year—the pandemic forced everyone to re-think and revise the way they serve their clients. Although we might expect that things slowed down across the industry, Discovery Data’s 2020 Year in Review shows the exact opposite happened. In this episode of The Data Possible Podcast, Craig Katz, EVP of partnerships and strategy, discusses the activity that took place across several different areas of our industry and how last year’s trends will help drive business in 2021. You will learn:

  • How many reps changed firms despite working from home
  • How new firms continued to join the industry and how that affects us all going forward
  • What factors contributed to the 16% growth in assets in the retail RIA industry
  • How these trends will impact business in 2021

Resources: Discovery Data | Year in Review

The Data Possible Podcast is produced by our partner, Advisorpedia.

Podcast Transcription:

Doug: Hello, and welcome to The Data Possible Podcast presented by Discovery Data. This is your host, Doug Heikkinen. Today, our guest is Discovery Data’s own Craig Katz, who is the Executive Vice President of Partnership and Strategy. Welcome back, Craig.

Craig: Doug, thank you very much. Great to be back and hope all as well.

Doug: It is. We are here today to talk about Discovery Data’s 2020 year in review report. It was a year dominated by COVID-19. People in firms across the financial services industry were there for their investors transforming the way they did business almost overnight, to continue to meet their clients’ needs. Discovery Data’s Year in Review paints a great picture of an industry that was able to adapt, evolve, and continue to grow. Craig, did we see the trends we were expecting to see?

Craig: I agree. I think we certainly saw an industry evolve and adapt quickly. You know, reflecting to our podcast conversation right at the front edge of the pandemic just about a year ago. We talked about how we thought the pandemic would really accelerate change across the industry and force us all to adapt. Based on the many insights that we have summarized here in our 2020 Year in Review report, it supports this and shows that the industry adapted even faster than we would have expected. And just some specific things to call out that I thought about here. Despite the pandemic, the report shows it was a very active year. And I think, highlighted by a few surprising trends. In the way I thought about it is before the pandemic shutdown, last March, if someone told you that this is what’s about to happen in the world, this pandemic is going to shut things down, it’s going to restrict travel in so many ways. In terms of industry, our industry will travel to conferences, face-to-face meetings, things that I think we all would say we consider essential in the past. And then, in 2020, during this pandemic, you are going to see 32,000 people move to a new firm. 100,000 people, overall, when you count in and out of the industry plus moves to new firms. You are going to see record high RIA M&A in this year, total number of registered firms surpass 40,000 for the first time ever. And that the RIA channel was going to expand in terms of retail firms accelerating the number of firms accelerating growth in 2020. It increased 2.5% compared 0.5% in 2019. And that we would also see overall AUM in the retail channel grow 16%. If someone laid that all out for you, you would say that cannot be. And those are the real facts. That is what happened. It really highlights what an amazing year 2020 was in so many ways.

Doug: Yeah, let us dig down a little bit into some of those facts that you gave us. Reps moved around at a pace last year when we physically could not move is super interesting. What does that mean for recruiters and firms selling to advisors in 2021?

Craig: Yeah, I agree, to me that that really stood out. It was surprising and amazing, considering how business was done in the past. To see folks continue to move at such a high rate, and doing so by essentially phone and Zoom meetings. I think again, it really speaks to how far and fast the industry adapted from a recruiting or distribution standpoint. And from our perspective, given our business, I think the movement in part really highlights the need to understand trends, have a good pulse of what is happening. Because the unexpected may likely happen and having optimized data is really table stakes. One of the highlights for our business in 2020, where our market needs hygiene and integration services. I think as clients, more of them quickly realized that to start, they need accurate data, a clear picture of the marketplace. And without it, there was just a lot of pain in terms of waste and or missed opportunity. Given that they could not do business in person it was primarily their outreach and ability to succeed was channeled, obviously, through digital virtual outreach. So as I mentioned, 100,000 people moved. When you think about the impact that has on data from just from a pure outreach standpoint, or the ability to effectively know who is where, and then more importantly, who fits your target criteria and how to communicate with them most effectively? Again, data is kind of the key foundation for that. I feel, with many others across the marketplace, I do not think we are going back, you know. I think there will be some new normal, where the digital and need to be effective virtually, is a big part of that. And with accurate and robust data as the foundation, I think that there is really a need, more than ever, to be strategic and thoughtful about segmentation, targeting, messaging, and timing, with outreach. Having strong data driving digital strategy and thoughtful outreach, that gets advisors the information they need, when they need it, is going to be the key for success. I think as more firms are adapting, it is going to put pressure on other firms to raise the game, to be able to break through and succeed. And, again, as it relates to our business, the way that we are thinking about things, what we are trying to do to help our clients succeed. We are bringing in new capabilities that power the trend insights, more effectively. We are bringing in new datasets that help target based on advisor intent and being able to allow that our clients to target better based on a more granular level, based on what advisors are interested in and researching today. We are also bringing in things like Interests & Lifestyle data to layer on top of our business profile information, which is an important dimension that can help with better targeting, segmentation, and messaging. So, you want to target an advisor that primarily invests in mutual funds and has 100 million or more assets under management. What we are driving towards and looking to empower our clients with is the ability to not only target the advisors that fit that profile but let us find those that are expressing intent in ESG, ETFs, or maybe moving to a new firm. You add in those two extra layers, and then think about what that translates into in terms of superior targeting prioritization the ability to create meaningful content is significant. I think the world has changed. And data will play a key role in helping clients succeed.

Doug: Something else that really jumped out to me looking at the report was so many firms continued to join the industry in 2020. Has that been trending up? What is the data telling us? And do you think that is going to continue?

Craig: Yes, so it is interesting one of those counterintuitive trend points here. In 2020, for the first time, we ended the year with over 40,000 registered firms, we have gotten over 40,000 before, but typically, it will tail off before the end of the year. We had 30,271 newly formed firms. We have seen an increase in the overall number of firms year over a year, and growth within the RIA channel, particularly over consistently over the past 10 years. So, I think the fact that it happened again, during the pandemic reinforces that it is a trend that we would expect to continue moving forward.

Doug: When you get right down to it, but something else that really jumped out to us was RIA assets grew by 16% last year. That is interesting. Talk more about that to us.

Craig: I agree. It is one of those fascinating stats. I think having more clients with more time, and the uncertainty that the pandemic brought forth, they probably wanted more help and attention. And, in general, increased engagement. And those discussions will open new opportunities and ways for advisors to help. I think it also speaks to the bigger picture to the industry’s response and focus on ensuring that their advisor clients and employees were getting the help that they needed to support those clients. But beyond that, I think it speaks to the growth of the RIA channel, which persisted through the pandemic. We saw an accelerated rate of the RIA firm growth in the channel, again, throughout the pandemic. The RIA channel attracted more advisors than any other channel. And I think during all this and other surprising fact, the market is doing extremely well, touching all-time highs, which I think also really helps the AUM growth. And that trend kind of speaks to all that. I think there are a lot of surprising stats and facts and trends that help explain and make sense of that 60% growth in assets this past year.

Doug: You have a different view of the industry because you stand moreover data. And this next question, probably cannot be supported by data. But is the work from home for advisors here to stay? Or do you think it is going to be a combination of both?

Craig: It is a great question, and one that many of our clients in the industry are thinking about and need to prepare for. My short answer is, I think it will be a combination of both, it will be part of this new norm. We are seeing more stories each day in the news that that is coming out from Investopedia and others about advisors, realizing that they can efficiently do more, and do it effectively from home, including servicing their clients. What I want to say is this is an important area for us this quality of information and insights on top of the data that we have, as you mentioned. We are doing a lot more to survey and create qualitative studies. It is a new initiative led by our Chief Data Officer, Saleem Khan, to bring this important dimension to our data, to the market and help our clients with these insights. It is dynamic, it is constantly changing, and it is obviously important. We found that the majority of those that we surveyed were working from their office and not home. What would I love to do is drill down into is are they going to the office and having in person meetings? Or are they just going to the office, because it is a quiet place, and they are sole practitioners, have small teams and they can go there in a safe way and work but still doing a lot of the business virtually? I think there is more to that we would like to know and learn. And we get hope to play a bigger role in that with our ongoing surveys and insights that we look to bring to the table.

Doug: If you had to pick one thing for advisors and others in the industry to take away from the Discovery Data year in review, what would it be?

Craig: I would say given the changes and lessons learned, the improvements in terms of efficiently getting business done when we needed to, that we are not going back to the old way. I expect and hope that 2021 get the pandemic behind us and be able to meet with our clients once again and each other and network. I think we will find that it will be much more balanced. It will be really bringing together the best of the pre-pandemic, and pandemic weeds that represent this new norm, so to speak. And I think overall be more efficient approach to doing business. And overall better experience for hopefully everyone in the industry, investors, advisors, and the firms that we work with that serve these advisors. I think from our perspective, in terms of how we help our clients, we are investing a lot in terms of market insights and analytics, additional datasets, the hygiene, and marketing services and looking to help clients through strategic partnerships like we have with Advisorpedia. And ultimately, we want to help inform our clients to understand trends across the industry and help them continually adapt and strategically leverage data and the most effective and focused with their resources and ultimately succeed. So, I think the key is just embrace the change and this new norm and continue to think about how we can best evolve and succeed and then we will.

Doug: Where can people go to learn more about this fantastic report?

Craig: Yeah, thank you. So, the Year in Review report can be found on our website or feel free to reach out to us at