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(June 26, 2003) How much an advisor takes home in pay directly impacts his or her perception of the financial advice industry, according to a recent survey commissioned by industry leader John J. Bowen Jr.’s firm, CEG Worldwide. Bowen presented his findings at the Million Dollar Round Table annual meeting in Las Vegas Wednesday.
For the purpose of this survey, 1,117 advisors were segmented into two groups: those with net incomes greater than $100,000 and those with net incomes below $100,000.
Eighty-one per cent of brokers clearly represented the majority of those with six-figure salaries. By contrast, just 24% of independent broker/dealer representatives and 36% of registered investment advisors earn $100,000.
“I pay particular attention to these differences in income because the higher and lower earning groups tend to have different attitudes and approaches,” Bowen noted. “Any advisor who is aspiring to the elite status needs to take a close look at the differences between themselves and the advisors in the higher income group.”
The big question facing advisors around the world these days is the future of the advisory business. Among advisors earning $100,000 or more, nearly 93% believe that competition in the financial services industry will grow more intense in the coming years, Bowen reported. Eighty-two per cent of advisors earning less than $100,000 expect an increase in competition. “Their success has not led these top-earning advisors to grow complacent about looming competition,” Bowen said. “Just the opposite — they are even more aware of it.”
A solid majority (71%) believe there will be fewer, but much more successful, advisors in the future.
Interestingly, the much-touted niche advisor got little praise from advisors surveyed. Only 17% believe specialists will be the most successful advisors in the future — most of this group of respondents consisted of investment advisors. The higher earning brokers were less likely to be concerned with specialization.
But there were other concerns that emerged from the CEG survey:
Concern #1: Finding wealthy clients, a concern that affects the majority of advisors, especially those in the independent broker/dealer channel. “The highest earning advisors have fewer, but wealthier clients compared to their less successful peers.”
Strategy: Focus on affluent, private clients by defining your goals and creating a vision. Narrow your focus and specialize on a target market. “Many elite advisors target markets that have plenty of money in transition such as divorces, inheritances, settlements or saleable assets,” Bowen explained. “Target markets make it easier to get referrals.”
Concern #2: Another concern for the advisors surveyed was book size. Generating significant asset growth was the number-one concern for more than 90% of brokers, dealers and investment advisors.
Strategy: Use an investment consulting process. The difference between selling products and offering a consultative service is that the latter brings home a higher income, Bowen noted. What services do the high net worth want? “The service most desired by the affluent is assistance with asset allocation,” Bowen noted. Financial and estate planning falls second and tax planning is a distant third.
Concern #3: The more financially successful advisors report working with a top wholesaler to be a primary concern. As advisors earn more, there is a greater interest in partnering with institutions more effectively.
Strategy: Partner smartly with institutions. Affluent clients expect holistic financial planning and expect that you will offer a wide array of services. “You will have to outsource many services, especially those that are not part of your core expertise,” Bowen noted. “This allows you to maintain the critical client focus that gives you an edge over your competition and it means that the partners you choose may be the single most important factor in your success.”
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Filed by Sheila Avari, Advisor’s Edge, savari@rmpublishing.com.
(06/26/03)