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Irony! As Opportunities Increase, Financial Advisors Decrease

By Ray Sclafani | August 9, 2012

It’s a paradox! Just as opportunities for financial advisors are on the rise, more advisors than ever before are leaving the industry. A study by research firm Cerulli Associates reveals that the ranks of U.S.-based financial advisors fell by 2.3 percent or 7,000 in 2011. The firm expects this trend to continue, with the industry losing approximately 19,000 advisors during the next five years.

Add these numbers to those who are retiring as the industry matures, and you’ve got an industry that looks to be on the decline. However, here's the ironic fact. The opportunities available for savvy advisors who can capitalize on money in motion opportunities as baby boomer entrepreneurs sell their businesses and boomers transfer assets to their children are greater now than they’ve been in recent history.

Sales vs. Wealth Management Mentality

So., what’s going on? It’s the “old” sales mentality clashing with the “new” CEO wealth management mentality. Under the old models and rules, advisors and brokers prosper when markets are rising but aren’t able to get ahead in sideways, falling or volatile markets like the ones we’ve seen recently. That reflects the findings of the Cerulli study, which noted that the ranks of self-employed broker-dealers fell in 2011 to 80,000 due to the problems inherent in running an investment advisory business where clients are trading less and the stock market was stagnant.

Reflecting the new trend towards operation of a wealth management business, a bright spot in the industry is in the RIA sector, where more and more breakaway brokers are leaving large wirehouses to start their own firms. The study found that the number of RIAs grew by 2.8 percent in 2011 and has increased on average 6 percent growth a year since 2007. In addition, assets managed by RIAs rose by 14 percent last year to $1.4 trillion.

This solidifies a related shift in client attitudes, as more clients prefer to pay a fee for advice rather than a commission for products or on trades. Many clients, especially high net worth clients, are disillusioned with the potential conflict of interest issues with commission-based products and would rather pay a percentage fee based on their assets managed by their advisor and/or a fee for specific services such as financial planning.

The take-away

Financial advisors who want to take advantage of money in motion opportunities available now and in the future will be well advised to consider what they need to do to build their firms out to meet the wealth management needs of high net worth clients. For many, this will involve taking steps to improve processes, create operational efficiencies and build a highly responsive customer service oriented team.

By focusing on a specific high net worth niche, affiliating with professional advocates who can provide complimentary services and fine-tuning client acquisition and engagement strategies, such wealth managers will be well positioned to grow assets under management, increase the number of high net worth families served and build a sustainable wealth management enterprise with intrinsic value.


For a complimentary ClientWise Learning Tool that helps you affiliate with other professional advocates in order to improve your wealth management practice, please see below:


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Topics: Leadership Marketing & Communication

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