2020 Year in Review: Changes to the Financial Services Industry That Will Impact the Year Ahead With Craig Katz

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

Related: What Financial Advisors Can Learn From the 2020 Mergers and Acquisitions Landscape with Mark Bruno



Craig Katz, Douglas Heikkinen

Douglas Heikkinen  00:03

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

Craig Katz  00:19

Doug. Thank you very much. . .

Great to be back and hope all as well.

Douglas Heikkinen  00:24

It is. We're here today to talk about Discovery Data is 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 Katz  00:56

Well, first, I agree, I think we certainly saw an industry evolve and adapt really quickly, you know, I kind of reflected back to our podcast conversation right at the front edge of the pandemic about just about a year ago. And we talked about how we thought, you know, the pandemic would really accelerate change across the industry and force us all to adapt. And I think that based on the many insights that we've summarized here in our 2020 Year in Review Report, really supports this and shows that the industry adapted maybe even bigger and faster than we would have expected. And just some specific things to call out that I thought about here. You know, despite the pandemic, it was 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, you know, before the pandemic shutdown, last March, someone told you that this is what's about to happen in the world, right, this pandemic, is going to shut things down, it's going to restrict travel in so many ways, in terms of industry, you know, with our industry will travel conferences, face to face meetings, things that I think we all would say we consider the central in the past and prior to the pandemic, and said that that's what's going to happen predicted the future. And then also stated, and by the way, in 2020, in the midst of this within our industry, you're going to see 32,000 people move to a new firm, actually 100,000 people, overall, when you count in and out of the industry plus moves to new firms, you're going to see record high RIA M&A in this year, you know, you're going to see the year end, total number of registered firms surpass 40,000, for the first time ever. And that the re channel was going to expand in terms of retail firms accelerating the number of firms accelerating growth in 2020. It increased from 2.5%. I'm sorry, increased 2.5% compared 2.5% in 2019. And that we'd also see overall a retail or a channel growth 16%. Right, if someone laid that all out for you to say at least I would say that that's not That can't be. And that's those are the real facts. That's what happened. And I think, you know, really highly Twitter would have amazing in so many ways. 2020 was,

Douglas Heikkinen  03:22

Let's dig down a little bit into some of those, those facts that you gave us. Reps moved around at a pace that they did last year, when we physically couldn't move is super interesting. What does that mean for recruiters and firms selling two advisors in 2021?

Craig Katz  03:39

Yeah, I agree to me that that really stood out. It was really surprising and amazing, again, considering how we know business was done in the past to see folks at that continue to move at such a high rate, and doing so by essentially phone and, and zoom meetings. And, you know, I think again, it really speaks to how far and fast the industry adapted, you know, from I think whether 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's happening. Because the unexpected, you know, may likely happen and, and, and also having optimized data, you know, is really table stakes. One of the highlights for our business in 2020, where our market reads hygiene and integration services. I think as clients, more of them quickly realized that to start, they needed 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. And, you know, given that they couldn't do business in person late it was it was primarily there. outreaching and ability to succeed was channeled, obviously, through digital virtual outreach. So, you know, as I mentioned, 100,000 people moved, right, 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, and, and then more importantly, who fits your target criteria and how to most effectively communicate with them? Right. Again, data is kind of the key foundation for that. And I don't think it's I think, you know, interesting topic of discussion, I see and feel and experience with many others across the marketplace, I don't think we're going back, you know, I think there'll be some new normal, where the digital and need to be effective, you know, virtually, is, is a big part of that. You know, and then, with accurate and robust data as the foundation, I think that, you know, there's really a need more than ever to be strategic and thoughtful about segmentation, targeting, messaging, and timing, with outreach, and having a really strong data driven digital strategy and thoughtful outreach, that gets advisors the information they need, when they need it, is going to be really the key for success. Because I think as more firms are adapting, it's going to put pressure on other firms to raise the game, to have the to be able to break through and succeed. And, again, as it relates to our business, the way that we're thinking about things, what we're trying to do to help our clients succeed, you know, we're bringing in new capabilities that that power, you know, the trend insights, more effectively, we're bringing in new data sets that help better 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, and, and better time, the outreach, we're also bringing in things like lifestyle and interest data to layer on top of our business profile information, which is a really important dimension that again, can help with better targeting and segmentation and, and messaging, right to kind of compare the, what I'll call the old school targeting, you know, based on just a baseline data that we provide, you know, so you want to target an advisor that primarily invest in mutual funds. And as 100 million or more under management, you know, there you go, right, and I call sent an email trying to catch up with them at their office or at a meeting today, kind of the new school a new norm, if you will, what we're what we're driving towards and looking to empower our clients with is the ability to not only target the advisors that fit that particular profile, but let's find those that are expressing intent in, you know, ESG, ETFs, or maybe moving to a new firm, and who also likes sale, right? You add in those two extra layers, and then think about what that translates into in terms of superior targeting prioritization, again, the ability to create meaningful content and time that outreach, and ultimately, results is, is, you know, significant. So yeah, I think, again, the world has changed. And, you know, data will play a key role in helping clients, you know, succeed.

Douglas Heikkinen  08:37

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's the data telling us? And do you think that's going to continue?

Craig Katz  08:51

Yes, so it is it is interesting, right, one of those counterintuitive trend points here. And as I mentioned, yeah. And in 2020, for the first time, we ended the year with over 40,000 registered firms, we've gotten over 40,000 before, but typically, it'll tail off before the end of the year. We had 30 271 newly formed firms. You know, I think it's we've 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, you know, reinforces that it's a trend that we would expect to continue moving forward.

Douglas Heikkinen  09:44

And we'll be right back. We're here with Craig Katz, discovery data's executive vice president talking about the discovery data is 2020 year in review report.

Another statistic that’s really interesting. When you get right down to it, but something else that really jumped out to us was alright, assets grew by 16%. Last year. That's, that's really interesting. talk more about that to us.

Craig Katz  10:14

Yeah, I think I again, agree, right. It's one of those fascinating stats. But I think having more clients with more time, and the uncertain uncertainty that the pandemic brought, you know, forth, they probably wanted more, you know, help and attention. And, in general, increased engagement. And those discussions Can I think help will open up new opportunities and ways for advisors to help. I think it also speaks to, you know, bigger picture to the industry's response and, 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 again, to be talking about the growth of the re channel, which, you know, persisted through the pandemic, we saw an accelerated rate of the retail firm growth in the channel, again, throughout the pandemic, the retail channel attracted more advisors than any other channel. And I think that also the fact that, you know, macro, right, in the midst of all this and other surprising fact, the market is, you know, that extremely well, right, touching all-time highs, which I think also really helps the LM growth. And that trend kind of speaks to all that. So. Yeah, I think there are a lot of, you know, surprising stats and facts and trends that, that that help explain and make sense of, you know, that that 60% growth in our assets this past year,

Douglas Heikkinen  11:54

You have a different view of the industry, because you stand on top of all this data. And this next question, probably can't be supported by data. But is the work from home for advisors here to stay? Or do you think it's gonna be a combination of both?

Craig Katz  12:10

And it's a great question, and one that many of our, I think our clients in the industry are thinking about and need to prepare for? You know, my short answer is, I think it will be a combination of both, it'll be part of this, this new norm, I think we're seeing more stories, right each day, in the, in the news that that's coming out from an advisor, PD and others about, you know, advisors, realizing that they can efficiently do more, and do it effectively, you know, from home, including servicing their clients. You know, I think that, you know, a few things. And what I want to say is, we this is an important area for us, right, this quality of information and insights on top of the, the data that we have, as you mentioned, so we are doing a lot more to to survey and create qualitative studies, it's actually a new initiative led by our chief data officer Salim Khan, to bring you know, this, this important dimension to to, to our data to the market and help our clients with these insights. But you know, because these are, it's dynamic, it's constantly changing. And it's, and it's obviously really important, but the fact that we, sorry, incoming call, cut me off. But what I was saying was, we actually found that the majority of those that we surveyed were working from their office and not home. What I'd love to do is drill down into that, you know, are they going to the office and having in person meetings? Or are they just going to the office, because it's a quiet place, and their sole practitioners are have small teams, and they're able to go there in a safe way and work but still doing a lot of the business virtually right. So I think there's, there's some, there's more to that we'd like to know and learn. And we get hope to play a bigger role in that with our, our ongoing surveys and insights that we look to bring to the table. You had

Douglas Heikkinen  14:23

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 Katz  14:33

Yeah, I'd say given the changes and lessons learned improvements in terms of efficiently getting business done when we needed to, in the sense that we're not going back to the old way. You know, I expect and hope that 2021 or one we'll get the pandemic behind us to we'll be able to once again meet with, you know, our clients and each other and network, but I think we'll find that it'll be more balanced. It'll be really bringing together the best of the pre pandemic, and pandemic weeds that represent this, this new norm, so to speak. And I think overall be more efficient approach to doing business. And, you know, overall better experience for hopefully everyone in the industry, investors, advisors and the firms that we work with that, you know, that serve these advisors. I think from our perspective, in terms of how we help our clients, we're investing a lot in terms of market insights and analytics, additional data sets, the hygiene and marketing services and also looking help clients through strategic partnerships like we have with Advisorpedia. No. 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, and this new norm and continue to think about how we can best evolve and and succeed and, and then we will,

Douglas Heikkinen  16:07

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

Craig Katz  16:11

Yeah, thank you. So the Year in Review report can be found on our website, which is discovery data.com. Or feel free to reach out to us at contact at Discovery data.com.

Douglas Heikkinen  16:25

Craig, it's been quite a pleasure for everyone at Discovery data, and the data possible podcast team. We thank you so much for joining us.

Craig Katz  16:35

Thank you, Doug. Appreciate it. Take care.


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