Posts Tagged ‘Inc.’

What Are Top Advisors Doing?

Wednesday, March 13th, 2013

While every advisor has his/her own unique business, there are common traits to be found among the most successful advisors that can be used as a helpful guide for all advisors. The most recent source of useful information in this regard is the always reliable PriceMetrix Inc., which just released its third annual Report on the State of the Retail Wealth Management.

(I always like their studies because of the depth and breadth of the data that they use – data representing more than 7 million retail investors, 500 million transactions and over $3.5 trillion in investment assets.)

While average (per advisor) overall production and assets under management increased last year, revenue on assets declined by 3%, as revenue growth did not keep pace with asset growth. Equity trade volume also declined, and while the shift to fee-based business continued, it did so at a slower rate than the year before. Among these somewhat mixed messages were some positive takeaways:

  • Advisors reduced the number of households that they serve from an average of 165 in 2011 to 159 last year – with the focus moving to deepening relationships with their largest clients.
  • The average size of households grew in 2012 by 13% (from $435,000 to $491,000) as did revenue per household.
  • The proportion of households with at least $250,000 in investable assets rose from 34% to 38%.

The key to future success, according to PriceMetrix, Inc. President Doug Trott, is that advisors “need to continue to increase the value of their service, by working with fewer households, deepening client relationships and increasing their capacity to service their remaining clients. Advisors also need to ensure that their pricing reflects their increase in value.” I concur with Mr. Trott.

Finally, and perhaps most useful to advisors, three areas of unrealized potential were identified by PriceMatrix in their analysis:

1 – 39% of households had less than $50,000 in investable assets, with the implication that advisors should consider dropping these smaller households if they can’t deepen these relationships. My guess is that the most successful advisors have a lot smaller proportion of these size accounts in their books of business.

2 – 42% of households have only one account with their advisors – somewhat surprising in the aggregate. Successful advisors leverage their relationships to open-up multiple accounts per client, including retirement accounts, and with multiple family members when possible.

3 – The average equity trade was priced at a 35% discount, meaning that the average advisor gave-up $46,000 in discounts last year. While these results are for equity trade, I think the same principle holds for fee-based business as well. The most successful advisors know their value and know how to price it without having to discount deeply.

Some good food for thought – every advisor should ask him or herself what changes they can make to their client mix to increase their productivity and spearhead growth in their businesses.