Do This Instead of Moving Up Market: Skip Schweiss

The RIA industry has experienced tremendous growth over the past several decades, but its professionals risk losing relevance (and revenue) if RIA firms don’t find better ways to profitably deliver their services down market.

That warning was among the key points raised this week in a new discussion between ThinkAdvisor and Skip Schweiss, CEO of Sierra Investment Management in Santa Monica, California.

Schweiss is well-known in the RIA industry as the former president of TD Ameritrade Trust Co. and managing director of advisor advocacy for TD Ameritrade Institutional. He was also the 2021 president of the Financial Planning Association, a role he took on after a prior five-year stint as an FPA board member.

Schweiss says his current organization operates more as a tactical investment manager than a traditional advisory shop, as Sierra operates six of its own funds and delivers “lots of models” to RIAs using proprietary and outside funds.

As of early 2023, the firm’s solutions are distributed on both the Envestnet and Orion platforms, as well as on all the major independent broker-dealer platforms, including LPL Financial, Cambridge, Advisor Group and others.

According to Schweiss, the firm’s focus on serving RIA clients continues to give him a powerful lens into the ongoing trends and challenges affecting the work of fee-based financial planning professionals. As recounted in the Q&A dialogue below, Schweiss sees significant reason for optimism about the independent RIA industry’s future, but there are also major emerging obstacles that must be tackled with urgency.

In particular, RIA firms must work harder to ensure their unique value proposition of delivering advice in clients’ best interest continues to stand out in an increasingly complex and competitive financial services landscape. RIA leaders also have to ask tough questions about succession planning, sourcing more diverse talent and targeting the right base of clients, Schweiss says.

While the industry’s future looks bright, Schweiss warns, firm leaders who are failing to innovate and reconsider the client service status quo will have a hard time growing their businesses in the changing environment.

ThinkAdvisor: Can you remind us about your own professional path and how you have ended up at Sierra?

Schweiss: Yes, as some of your readers may recall, I served for a long time as a leader at Fiserv, working as the leader of their trust company in Denver. During my two decades at Fiserv, we built out a strong advisor custody business, and we also built out the retirement plan services business during that time.

Then, in 2007 or 2008, TD Ameritrade came along, and they wanted the advisory custody business to add to their scale. So Fiserv sold that business to TD Ameritrade, and I ended up transitioning and staying with the new TD Ameritrade entity in Denver.

I worked there for 12 years, and we did some great work servicing retirement plans and marketing our custody and support services to advisors. Typically, the advisors we supported were helping small businesses and their owners create retirement plans, and they were helping with all the other services advisors deliver to their individual and institutional clients.

The work was kind of ahead of its time, considering the emerging conversations that are happening today about distributing advisor-mediated retirement plans in the small-business marketplace. My personal view has always been that advisory professionals, and especially RIAs, are dramatically under-investing in this space. To this day, the small-business retirement plan space is dominated by insurance companies and broker-dealers.

Eventually, TD Ameritrade Institutional was itself acquired by Charles Schwab, and I left the business as a result of that change. It’s something that happens in this space when big acquisitions occur.

I was then able to really focus on serving as the FPA president, and I was eventually contacted by Dave Wright and Ken Sleeper, who are Sierra’s founders. They had been clients for 30 years or so, so they asked me what I was planning for my next chapter.

I was 58 at the time that Dave and Ken called me, and I had the thought that I wanted to work for a smaller, more entrepreneurial type of firm. Ultimately I went to work for Sierra as CEO in the fall of 2021, and it’s been a great ride so far.

How do you view the status of the RIA industry in 2023? What are the big challenges you see for firm leaders?

There is a lot I could point to. For example, I hear a lot about succession planning discussions and challenges. The surveys I see show that only something like one-third of RIA firms currently have a formal succession plan in place, and this is despite the fact that we have basically the same number of certified financial planners who are over age 70 as under age 30.

That’s clearly a challenge and it’s not going away. Frankly, there are not enough young people entering the business, and that concerns me.

There are a variety of causes we can point to, including a misunderstanding of what it actually can mean to work in financial services. We need to make sure young people understand that you don’t need to just be a math guru or a sales master to have a space in this industry.

When I was at TD for all those years, we put a lot of effort and resources into the sponsorship of scholarships in financial planning programs, and we’d go out there and try to talk to a lot of college groups about careers in this space. So often, we heard people say they just didn’t want to “work for Wall Street.”

So, financial professionals today are still getting painted by a broad brush in many cases, and that’s a problem. We need to get the message across that there is a huge number of jobs and different ways to get involved in this industry.

My view is that many young people really prize this idea of helping others and making a difference. We need to get the message across that the advisory space allows people to do this, while earning a good living for their family.

What would you say are the biggest client service challenges and business development opportunities for RIAs in 2023 and beyond?