Displaying items by tag: clients

Client turnover and attrition is a reality for every financial advisor. In order to combat this entropy, advisors need to have a marketing plan, generate leads, and build a pipeline of prospects. For many advisors, this is something they don’t enjoy as they get into the business because they enjoy analyzing investments and servicing clients. 

However, this type of discipline is necessary to ensure that your firm keeps growing. In an article for Nasdaq.com, Luke Acree, the President and founder of ReminderMedia, discusses some ways that financial advisors can generate leads which is the first step in growing a practice. 

The simplest step is to ensure that you are providing proper and full attention to existing clients. A good idea before embarking on a growth plan is to ensure that your current clients are satisfied. This also increases the chances of getting a referral which tend to be the highest-quality leads. 

Building on online presence is a strategy that will pay off in the long-term. In the short-term, there is little return for your efforts, but it’s increasingly how younger generations will find you and make decisions. Ensure that your profiles are professional while displaying your personality and unique offering. 

Finsum: High-quality leads are integral for any financial advisor practice to grow. Here are some suggestions on how advisors can ensure a steady stream of leads to help build their pipeline of prospects. 

The alternative investing trend was growing at a rapid clip over the past decade, but its seen an uptick in interest and adoption following the poor performance of stocks and bonds. While both asset classes have delivered strong, long-term results, they have performed poorly in inflationary, higher-rate environments.

In contrast, alternative investing delivered better returns while also reducing portfolio volatility. As access to this category has increased, there is more liquidity and transparency which is, in turn, attracting more interest from institutions.

In an article for Business Kora, Jung Min-Hee covers how the Korea Investment Corporation (KIC) will be increasing its allocation to alternative investments to 25%. Currently, it is the 10th largest sovereign wealth fund in the world and has $170 billion in assets. As of the start of the year, it had 22% allocated to alternatives.

In an interview, KIC President Jin Seung-ho indicated that the fund is particularly interested in private credit as he doesn’t see too much risk in this segment of the market. Concurrently, he doesn’t see the Fed cutting rates until 2024.

Finsum: Many financial advisors are nearing retirement. One option that is growing in popularity is for advisors to sell their practice but remain as an employee for a certain amount of time.

In an article for InvestmentNews, Kristine McManus, the Chief Advisor Growth Officer at Commonwealth Financial, discussed various considerations for advisors who are nearing retirement. Many want to exit their own business in a gradual way rather than suddenly and continue working with new owners to provide a seamless transition for their clients. 

According to Commonwealth's research, financial advisor M&A data over the last decade shows that there were 359 deals. In 205 of the deals, the advisor who was selling, immediately retired and exited the business. However, a third of the deals saw the advisors remain past the acquisition.

Some of the positives of this approach are that it leads to less client attrition and provides a natural way to introduce clients to the new management team. For the selling advisor, it allows them to gradually ease into retirement while slowly letting go of responsibilities in a more organic way while ensuring that their business and clients are in good hands.

There are some negatives which include a potential clash in management styles or investing philosophy between the seller and acquirer. Often, the selling advisor has difficulty giving up control when it comes to making major decisions and transitioning into an employee role. 

Overall, both parties need to be aligned in terms of goals and constant communication in order to minimize the negatives and accentuate the positives with this type of transaction.

Finsum: Many financial advisors are nearing retirement and need to have a succession plan.  One option that is growing in popularity is for advisors to sell their practice but remain as an employee for a certain amount of time.

Many RIAs are testing out new pricing models and moving away from the traditional practice of taking a cut of assets under management especially for placements into alternative investments. In a piece for AdvisorHub, Suman Bhattacharyya covers some examples.

Overall, there is increasing pushback from clients about paying management fees especially when the market is falling. Additionally, these annual fees can compound over time and become a significant amount especially for long-term clients. 

These concerns are magnified in years with lower or negative returns. Some advisors are choosing to take a cut on performance, between 10% and 20%, to align clients and advisors’ interests. Others are moving to a fixed-fee model which means either billing by the hour, charging a subscription or a fee per project.

According to some, 2022 which saw negative returns for stocks and bonds is simply accelerating what had been a developing trend. Despite these changes, 82% of revenue for RIAs come from fees on total assets under management. 

Therefore, RIAs reliant on these fees for their business should consider alternative models or at least prepare for conversations with clients about the matter. 

Finsum: The vast majority of RIAs are reliant on fees generated by total assets under management. However, many clients are electing to move away from this model. 

At Morgan Stanley’s annual US Financials, Payments & Commercial Real Estate conference, CEO James Gorman said that the bank is no longer relying on financial advisors recruiting for growth. 

Gorman sees future growth coming from the ‘funnels’ that Morgan Stanley has built which it sees as key to the next $1 trillion in assets it aims to bring over the next 3 years. After a fevered pace of advisor recruiting, the company is seeing minimal movement other than small teams coming and going. 

As part of the changing landscape, Morgan Stanley will only be recruiting high-quality teams with substantial assets. This does affect the marketplace given that Morgan Stanley has been one of the most aggressive in terms of recruiting over the past couple of years. 

Overall, the bank is moving towards a more holistic, comprehensive strategy when it comes to acquiring assets. In the first quarter, it added $110 billion in new assets. $28 billion came from workplace channels, $20 billion came from advisors hired away from struggling regional banks, and the majority of the remainder came from existing brokers. 

In the future, Gorman sees the workplace channel as being its most significant source of growth, especially given that the cost of luring advisors continues to increase. 

Finsum: Morgan Stanley has been a leader in advisor recruiting. But, this is changing as evidenced by CEO James Gorman’s recent comments.