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It’s Fall 2009 and financial advisers are…not making any changes??

|Includes: AMTD, ETFC, The Charles Schwab Corporation (SCHW)

AdvisorBenchmarking, a best-practices financial services consulting firm owned by Rydex/SGI, released its annual benchmarking survey (.pdf) results and I have to admit, I find them surprising, yet somewhat predictable.

After surveying over 500 RIA firms earlier this year, the firm distilled various trends in the industry. Definitely check out the whole report, but I wanted to highlight a few salient points:

  • After an extremely trying 2008 and early 2009, most advisors are not making any changes to their practices.
  • Passive referrals, which used to represent the largest source of new clients, fell substantially in 2008.  Only 20% of new clients came through this channel versus 45% in 2007.
  • Only 36% have an actual marketing plan in place.
  • In spite of not making any changes and lacking marketing plans, most advisors (88%) cite finding new clients as the most significant threat to their business.
  • Assets and AUM fees declined 16% over 2007 levels.

I’d hate to kick a dead horse here but the writing is all over the wall.  Let’s take less effective marketing techniques deployed against the lack of a cohesive plan and overlay decreasing assets and an eroding fee structure and you’ve got to make a change.  It isn’t working.

That doesn’t work.  When times are good, FAs can get away with this but they aren’t so good.  In spite of the market bouncing back, the business side of the industry isn’t.  Competition is heating up.  It’s just getting harder for the average person to make it.

But it doesn’t need to be that way.  If you are part of the 36% of professionals with a marketing plan, you’re already ahead of the game.  Financial advisory is just like any other business.  Planning and execution are necessary to grow effectively.

According to the InvestmentNews, which interviewed the market researcher behind the study:

Despite the radical changes in the investment environment of the past year-and-a-half and the waning confidence of clients, 63% of respondents said that they aren’t making changes to their firms’ operations or compensation structure.

“I thought they would have been more proactive and make more efforts to make changes,” Ms. Ivanova said. “Those who make efforts to do that will be the winners.”

Couple of questions beg answering here:

  • How easy is it to raise fees in this environment?
  • Are there ancillary revenue streams like 401(k) admin work or lecturing?
  • Are there services you can offer to differentiate yourself from your peers?
  • Advisors either are a) less effective at eliciting referrals or b) clients are less willing to give them.

Regardless, sitting back and waiting/hoping things will change isn’t working.  It’s  time for plan B.