Unlocking Real Value Blog

I’ve read a number of interesting articles/reports lately that merit a mention – and could help lead to business-building ideas.

1) Referrals – a recent study by Prudential about referrals indicates that while clients think it takes 4.8 years on average to build up enough trust to make referrals, most advisors think that such trust is built in half of the time – just over two years. Perhaps advisors need to be a little more patient! The good news, however, is that while clients believe that referrals have a lot of social risk, more than half of the people surveyed have made referrals, and another third said that they would.

2) Fee-based compensation – According to Cogent Research LLC, two-thirds of industrywide compensation will come from asset-based fees by 2015, up from 59% today. The study included 1,700 financial advisors with an average of just over $100 million under management. The likely biggest loser from this continuing and growing trend – actively managed mutual funds.

3) Advisors too focused on baby boomers – a recent Cerulli Associates report (conducted in conjunction with Phoenix Marketing International) warned that advisors are focusing too much of their time on baby boomers, just at the time when these investors are going to be retiring and entering the spend-down phase of their lives. Simultaneously, fewer than 20% of investors under the age of 40 feel that they are getting enough attention. Advisors, by ignoring these younger investors, could miss out not only from the growth in assets of these investors as they become more successful, bus also from the more than $2,3 trillion in investible assets estimated to be transferred via inheritance between 2026 and 2030.

4) Wirehouses face continued threat from RIAs – the Aite Group, in a new report, indicates that independent shops and discount brokers should continue to benefit from their ability to tailor customer experiences more easily than wirehouse advisors. While there is no denying the continued growth in market share of wirehouse competitors, I for one still believe that a wirehouse advisor can be successful and create a very good client experience – they just have to work a little harder at it! (According to the story, RIAs boosted assets last year by 18.2%, discount brokers by 12% and the wirehouses by 8.2%.)

I was asked to comment on the results of an Ignites (A Financial Times Service) poll of financial services employees and their thoughts on retirement. About 84% of respondents say that they are saving enough for retirement, although 52% said that while there current savings rates are sufficient, they still feel that they should be putting more money aside.

This contrasts to a recent Gallop poll which found that 46% of non-retireed Americans do not feel that they will have enough money to retire comfortably.

First, why are we in the financial services industry so much more comfortable with our outlooks for retirement? To quote from the article:  “As Andy Klausner, founder and principal of AK Advisory Partners says, “You would expect fund industry employees to be more tuned in to retirement and saving for retirement than the average person simply through their day-to-day exposure to the issues.

“Even if they aren’t directly involved in the products, for example, they are certainly more aware of the advertising and marketing that their firms do. This goes for all [fund industry] employees,” he writes in an e-mail response.

Additionally, fund firms themselves are taking an active role in helping their employees prepare for retirement. One way that firms, such as Invesco and Vanguard. accomplish this is by making their employees eligible to participate in their 401(k) plans from the day they start employment, rather than requiring a waiting period.”

Secondly, however, why do we feel that we should still put away more? I think there are a number of reasons: 1) people are living longer than ever before, so the fear of outliving your savings, no matter how large it may be, is great; and 2)  to quote from the article again: “A number of factors can hinder professionals from saving enough, Klausner acknowledges. For example, living costs usually are higher in the large cities where financial services firms tend to be located, such as New York. Plus these professionals may not be seeing their compensation rise as quickly as it did before the 2008 financial crisis, he says.”

Any thoughts to add?

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