https://www.pricemetrix.com/2014-exceptionally-strong-year-retail-wealth-management-industry-advisor-assets-hit-record-high-revenue-sharply-client-retention-improved/

PriceMetrix

2014 Exceptionally Strong Year for Retail Wealth Management Industry; Advisor Assets Hit Record High, Revenue Up Sharply, Client Retention Improved

But Challenges Remain—Many Advisors Struggle and Industry Is Aging 

March 30, 2015, Toronto, ON – In its fifth annual State of  Retail Wealth Management industry report, PriceMetrix, the industry leader in practice management analytics software, reports 2014 was an exceptionally strong year for financial advisors and their firms. Average advisor assets hit a record high, revenue surged and productivity moved higher. Advisors continued to reduce the number of clients they work with, and increased their percentage of fee based business, both contributors to increased client retention, especially among key clients.

At the same time, though, the industry continues to confront challenges. As PriceMetrix reported earlier this year, the industry is aging faster than the overall population, threatening future growth. Bottom performing advisors also struggled in 2014, actually seeing revenues decline, leaving them and their firms with difficult decisions moving forward.

“Financial advisors and their firms should be very pleased with their performance in 2014,” commented Doug Trott, President and CEO of PriceMetrix. “They made significant short term progress but, perhaps more important, they made fundamental improvements as well, such as increased client retention. That said, long term challenges loom over the industry which need to be addressed or future growth could well be threatened.”

Drawing on its database of more than 40,000 advisors, seven million investors and $3.5 trillion in investment assets, PriceMetrix reports assets under management for the average advisor reached $97 million in 2014, average advisor revenue surged 13% to $655,000 and revenue on assets, or RoA, improved to 0.69%, the first increase since the beginning of the financial crisis in 2008.

Advisors also continued to make progress reducing the number of clients they serve. The average number of clients in an advisor’s book fell to 150 in 2014, down from 156 in 2013. At the same time, average client assets increased to $628,000 from $562,000. Overall, since 2011, advisors have reduced the number of clients they serve by ten percent.

The industry also continued its transition to fee-based revenue in 2014. The percentage of fee-based assets in the average advisor’s book increased from 31% to 35% in 2014, while the percentage of fee revenue rose from 47% to 53%. By the end of last year, 25% of clients were doing at least some fee business with their advisor, as traditional transaction-based clients added fee accounts to their portfolios. Fee-based pricing also improved in 2014, rising from 0.99% in 2013 to 1.02% last year, the first increase in several years.

Importantly, client retention also improved in 2014, especially among key client groups. Among priority clients, who have more than $250,000 in assets, retention rose from 96.2% in 2013 to 96.7% in 2014. Retention among premium clients, who have more than $2 million in assets, rose from 97.4% to 97.7%.

“Even though these increases are modest,” noted Mr. Trott, “the fact that advisors are retaining clients at these high levels is very encouraging. The ongoing trend towards fewer clients is also extremely positive, as is the increased percentage of fee business. Both of these trends are directly improving advisor productivity and client experience which is at least partially reflected in last year’s impressive results.”

Longer term, though, the industry faces some fundamental challenges. Chief among them is the aging of both clients and advisors. The average age of retail clients is climbing at a rate of roughly six to seven months per year. One of the reasons is that advisors, even younger ones, are continuing to focus their efforts on attracting older clients, who typically have higher assets and yield more revenue. The data plainly show advisors are not increasing their efforts to attract younger clients. The proportion of new clients who are under 45 remains at 23%, a level that has not changed since 2011.

“Advisors and their firms simply cannot afford to overlook younger clients,” said Mr. Trott. “They need to devote a significant portion of their business development efforts to younger clients or their future growth will slow down, as our data clearly show. In our last Insights report, The Fountain of Growth, we showed how advisors can target younger clients to increase their future growth, with only a minimal sacrifice in current production.”

Advisors and firms also have to address the growing gap between fee-based and transactional-based pricing, which widened in 2014 as fee-based RoA increased. Clients in traditional transaction-based accounts may be even less inclined to move towards a fee-based relationship with an advisor, if transactional business continues to get cheaper. Advisory firms also need to meet the challenge of the growing gap between top performing advisors and bottom performers. Among the bottom 25% of advisors, production actually declined 15% last year.

About PriceMetrix

PriceMetrix is the first choice in practice management software for North American wealth managers.

Our solutions use analytics and industry benchmarking to help advisors and their firms better serve their clients and grow their businesses.

PriceMetrix directly measures aggregated data representing 7 million investors, $3.5 trillion in investment assets, 500 million transactions, and 2.5 million fee-based accounts.  PriceMetrix combines its patented process for collecting and classifying data, with proprietary measures of revenue, assets, and households to create the largest and most insightful retail wealth management dataset available today.

Founded in 2000 and headquartered in Toronto, Ontario, we service a notable range of retail wealth management firms within the United States and Canada. To learn more about why top firms and top advisors choose PriceMetrix, please visit www.pricemetrix.com or call and email us at 1-866-955-0514 and info@pricemetrix.com.

Media Contacts

Jon Teall
Teall & Associates
One World Financial Center
New York, NY 10281
212 317-8296
jteall@teallassociates.com