Unlocking Real Value Blog

Advisors – How Do You Compare To Your Peers?

PriceMetrix – an industry-leading data aggregator – just released its annual review of the retail wealth management business. The study confirmed some of the trends that have been playing out in the industry for the past few years and offered up some interesting data which advisors can use to see how they match up with their peers.

(One of the reasons that PriceMetrix is highly regarded is the breadth of their surveys – their data represents 3.2 million investors, 500 million transactions, 1 million fee-based accounts, 4 million transactional accounts and over $900 billion in investment assets.)

Some of the general results of the survey include:

  • Advisors and firms significantly moved away from smaller and less productive households to larger and more productive ones. The average number of households per advisor dropped 8% last year while the average revenue per household increased 7%. (Smaller households are defined as having less than $250,000 in investible assets.)
  • Overall, the industry percentage of smaller households decreased from 71% to 65%. And the percentage of larger households (defined as having more than $1,000,000 in investible assets) increased 12% and now represents 57% of all new assets added.
  • The trend toward fee-based accounts continued, with the number of fee-based account per advisor increasing 10% on average in 2011. Fee-based revenue, as a percentage of total revenue rose 10%.
  • The average return on assets declined slightly to 1.19% (it was 1.23% in 2009). The average new account had a ROA of 1.06%, confirming that the trend is to price new accounts lower than existing accounts.

None of these trends are surprising. Many advisors understand that it is much easier to service a smaller book of larger clients. The trend toward fee-based accounts has also been in place for a number of years. Somewhat disturbing, however, is the trend toward lower ROA. Even though we are in tough economic times, advisors who are able to articulate their value-added should not have to discount their fees to be competitive.

Take a look at your business and see how you compare to the average advisors in the study in the following four metrics:

  • Number of households – 177
  • Average household revenue – $3,174
  • Percentage of households with more than one account – 56.2%
  • Average household revenue of households with more than one account – $4,525

So advisors, what are the implications of this report? If nothing else, look at your book of business and see if you are using your time and resources efficiently. Are you providing the best client service? Are you operating efficiently? Are you being paid adequately for your time? Are you pricing your accounts correctly?

The goal here is not to see if you are “average.” But rather to see if there are ways that you can use these statistics to make improvements to your business model.

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