Tiburon Predicts Strong Growth Among Fee-only Advisers

In a press release, Tiburon, a market research and strategy consulting firm, said fee-only financial adviser average assets under management will grow to $310 million by 2012. Fee-only financial adviser clients will increase to 3.2 million by 2012.

Fee-only financial advisers currently generate $30 billion in revenues, but revenues will increase to $55 billion by 2012, Tiburon predicted. Fee-only financial advisers earn $15 billion currently, but their net income will increase to $20 billion by 2012, the release said. However, Tiburon says that fee-only financial advisers’ profit margin will decrease to 36% in 2012. The number of fee-only financial advisers served by custodians will increase to 27,000 by 2012.

As for the current marketplace, Tiburon said many advisers are really fee-based; fee-only financial advisers account for just 35% of all fee-only and fee-based financial advisers. Fee-only advisers have 25% fewer accounts, on average, than fee-based & commissioned advisers.

Fee-only financial advisers with firm size under $25 million and no assets account for one-half of financial advisers, and over half of all fee-only financial adviser assets are controlled by the 2,000 advisers with greater than $200 million in assets.

Most fee-only financial advisers commented during the research that offering wealth management services is a key to attracting high net worth clients, according to Tiburon. One-third of fee-only financial adviser assets come from retirement plan rollovers and another third is money moved from a different broker. Fee-only financial advisers’ ultra-high-net-worth investors have increased 2% in 2006, while their high-net-worth investors have decreased 8%

When it comes to investments, fee-based financial advisers may buy $75 billion per year in annuities, and will invest over half of their assets under management in mutual funds and individual securities. These advisers prefer to receive contacts quarterly, and financial advisers generally prefer less contact as the portion they accept in commissions increase, and fee-only financial advisers and fee-based independent financial advisers are far less likely to want in-person visits than fee-based wirehouse financial advisers.

Fee-only financial adviser mergers and acquisitions are up over 600% since 1999, with 81 deals taking place in 2007, Tiburon’s research found.

Executives can purchase Tiburon’s “An Initial Overview of the Fee-Only Financial Advisors (RIAs) Market” research report by contacting Sarah Sage at SSage@TiburonAdvisors.com or 415-789-2540.