The ClientWise Blog

The State of the Financial Services Industry

Posted by Chris Holman on May 10, 2011, 10:41:00 AM


There’s a pretty interesting interview with Chip Roame of Tiburon Strategic Advisors, who recently hosted the Tiburon CEO Summit, a semi-annual gathering of the renowned leaders and other muckety-mucks within the financial advisory industry.

Roame opines about some of the top industry trends:

Are the Wirehouses Alive, Dead, or Dying? (Alive and well, but how many advisors will they ultimately employ?)

Which Wirehouses are growing? (Of the four Wirehouses, only Wells Fargo has seen growth in advisor numbers. UBS America’s days seem numbered.)

Is the “Breakaway Broker” a real phenomenon? (Real…but not in mass numbers. Moreover, 80% of the advisors who leave the Wirehouses do so involuntarily.)

What’s the future of the independent broker-dealer? (LPL has lapped the field with 12,000+ advisors. For the smaller and mid-sized b/d’s, the future looks far less certain.)

What are the trends in consumer wealth? (Stocks have come back 50%+, housing prices haven’t.)

Is the advisory business generally healthy? (Extremely so. The trend is its friend.)

Speaking of the state of the industry, there was a somewhat engaging article in the April issue of Registered Representative, “The Myth of the Vanishing Advisor.” The article explores the health of the financial advisory industry from the standpoint of advisor population, i.e. given the demographic and retirement trends of the affluent, as well as the advisors themselves, will there be a shortage of financial advisors in the future?

One comment stood out for me. Stephen C. Winks, a Richmond, Va.-based management consultant for financial advisors, estimates that there are 17 million households with more than $100,000 in liquid investable assets. He goes on to say that if each advisor had about 200 clients, it would take about 85,000 advisors to serve the market, a fraction of the current population. (There are about 350,000 active financial advisors today.) “You can do the arithmetic very easily,” Winks says. “We've got way too many brokers.”

Not to quibble with Mr. Winks, but his calculations assume that all advisors, and advisory firms, have a homogeneity of skill sets and have been equally adept at staying current with some of the rapidly changing demands and expectations of the complicated financial lives of affluent investors.

From our vantage point, this is hardly the case.

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Topics: History