Unlocking Real Value Blog

What Do Successful Advisors Have In Common?

PriceMetrix, a leading industry think tank, recently issued a new report entitled “Moneyball For Advisors.” The study’s name is a takeoff on Michael Lewis’ book which detailed how the Oakland A’s used statistics – rather than high priced players – to assemble a championship-caliber baseball team. If you would like a copy of the study, please contact me.

The question PriceMetrix set out to answer is whether or not analytics can be used to gain an informal advantage in recruiting and advisor development. Their answer – and the data do seem to support it – is definitely yes. While I will focus on how advisors can learn from this study, PriceMetrix also analyzed the data in a way that should help recruiters and companies hire advisors who have a better chance of succeeding in the long-run (and thus in many cases justifying the paying of a large up-front bonus).

So, according to the statistics, what should advisors do to maximize their future production?

  • Maximize the percentage of fee-based business in their book;
  • Have a high number of households with more than $250,000 in assets;
  • Have a willingness to “fire” households with less than $250,000 (and to minimize the number of them);
  • Have deep client relationships (measured by multiple accounts per client and having a large number of retirement accounts); and
  • Be experienced – all other things being equal, past success bodes well for future success.

Advisors can control every aspect of their future production except for the last one. While there is little new in these results, they do reinforce much of today’s conventional wisdom.

As advisors consider their 2013 business plans, unless they have a natural niche that goes against conventional wisdom (and I will be the first to admit that some advisors do and can do well in these areas), they should target larger clients where there is the potential to build a deeper relationship by capturing more assets (and more family members if possible), and they should focus their sales and asset management on fee-based (or recurring) assets.

Food for thought to any advisor looking to the future.

(As a side note, one of the reasons I like to use PriceMetrix, and have confidence in their reports, is the breadth of their sample size. This study use aggregated retail brokerage data representing 6 million investors, 500 million transactions, 1.6 million fee-based accounts, 7 million transactional accounts and over $3.5 trillion in investment assets.)

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