Every investment advisor knows how difficult it is to predict the future. Forecasting the financial markets is hard enough. But when we cast our gaze forward at the changes taking place in the profession, a lot of new variables creep into the formula: the rapid evolution of technology, demographic and societal changes, plus wild cards like the recent Great Recession and financial reform legislation.

When this magazine was founded in 1970, who could have imagined that broker-dealers would serve independent RIA firms, that financial plans would be created and tracked using desktop computers in the office, that performance information would be uploaded to a password-protected site in cyberspace visible on the client's computer, or that the S&P 500 would grow from 72.25 to over 1,000? Today's reality would seem like science fiction. We've all seen a lot of changes over the years.

Some day in the distant future, the readers of this magazine may be serving clients who have relocated to their vacation home on the dark side of the moon, and conventional wisdom may say that the best hedge against inflation is a 5% allocation to mining stocks based in the asteroid belt. But our focus here is on the nearer-term future, five to 15 years out, a time when most readers of this magazine will still be involved in the profession.

As you'll see, the most plausible predictions offered by industry experts, taken together, paint an exotic and interesting picture of your professional future-including the rise of semi-aware electronic search "bots," sharing clients with advisors in Dubai or Lahore, larger advisory firms that function much like today's broker-dealers-and a few tricky navigational challenges between here and there.

BIG FIRMS VS. SOLOS

The Great Recession and 2008-2009 market downturn forced financial advisors to make improvements in the way they managed their businesses. They had to find ways to provide more client hand-holding and service despite fewer asset-under-management (AUM) revenues. Survival dictated a new focus on cost control, marketing and profitability.

Now many of these same advisors are responding to the approaching shadow of their retirement over the next few years, reports Mark Tibergien, CEO of Pershing Advisor Solutions. The average owner of an RIA business, 54-to-56-years-old, is starting to feel an urgent need to institutionalize operations so that the business he or she worked so hard to build can be transferred-safely and perhaps even profitably-to the next owner.

These two forces, taken together, are causing many advisors to recognize the value of scale for their businesses; that is, creating larger entities can offer some additional advantages: for instance, spreading all those new compliance costs from financial reform over a broader revenue base, and potentially allowing the advisors to hire professional management. "It's pretty clear that the industry will shift from being 70% solo practitioners to a world with a lot of firms that are pretty complex," Tibergien says.

The world of 2015-2030 will see the emergence of thousands of multi-practitioner advisory firms, which will operate alongside healthy, well-managed solo practices. Philip Palaveev, of Fusion Financial Network in Elmsford, N.Y., predicts that toward the latter end of our forecasting period the RIA community will settle into a pattern of sizes and scale that can be seen today in other, related professions.

For instance, according to Mark Koziel, director of specialized communities and firm practice management for the AICPA, of the 44,000 CPA firms in the U.S., some 33,000 are still owned and operated by single practitioners. But every market includes larger multi-partner entities. And, as you step up the size ladder, you'll find the regional accounting firms and the Final Four. The American Bar Association's most recent "Lawyer Statistical Report" shows that 48.3% of practicing attorneys in the United States work in solo practices; but the legal landscape also includes larger law firms in every city, plus national firms like DLA Piper (3,785 attorneys in 67 offices) or Baker & McKenzie (3,900 attorneys in 67 offices).

In the planning world, we can already see the top end of this spectrum enter the early formative stages. After closing on its purchase of Deloitte Investment Advisors in September, Aspiriant Investment Advisors now has more than 90 advisors and offices in San Francisco and Los Angeles (the original two), plus Boston, Cincinnati, Detroit, Milwaukee, Minneapolis and New York, encompassing roughly $7 billion under management. Tim Kochis, Aspiriant's co-founder and current board chair, says this is just the beginning of an expansion process, for Aspiriant and for the industry in general, that will turn larger advisory firms into branch offices, and their principals into shareholders.

But Kochis thinks the most attractive part of the arrangement is that it will save merging advisors from some of the business-model struggles that Kochis knows firsthand. "From a management and profitability standpoint," he says, "you reach a problem area when you're big enough to have a full array of costs, but not so big that you can amortize those costs over a large number of clients and achieve scale efficiencies." Kochis expects that in the next 20 years we'll see a "barbell effect," a landscape populated by large, multi-planner firms with $1 million or more in revenues, and solo practices that are equally profitable-with not much in between. One of the biggest challenges for advisors who reach for scale will be managing the journey through that intermediate size.