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In Practice September 15, 2009
Advisers Report Doing More for Less
Advisers, particularly in the wirehouse channel, have seen cutbacks in support and compensation in the last year, according to a report from the Financial Research Corporation (FRC).
Reported by Ellie Behling
Margaret Rorick, senior vice president and director of market research at FRC, calls it the “adviser pinch.” She told PLANADVISER.com: “They are doing a lot more work and they are doing it for less money.”
Some channels are feeling more of the pinch than others, the FRC research found. Across all channels, 40% of advisers said their firm has reduced the number of support staff in the last year. That number is more startling at the wirehouses, where 60% of advisers have cut back support staff. In contrast, only 16% of registered investment advisory (RIA) firms have cut back on support staff.
Almost a third (31%) of advisers in all channels has cut back the marketing or support budget. Wirehouses and banks were most likely to see cuts (43% and 45%, respectively), and independent advisers and RIAs saw not as many cuts (23% and 21%, respectively).
As assets shrunk, some advisers also experienced belt-tightening in their compensation. More than a fourth of advisers (27%) saw reduced bonuses or compensation structures in the last year. Wirehouse advisers were again mostly likely to see those cuts (44%), versus advisers at regional (30%) and independent (15%) broker/dealers and RIAs (19%).
Rorick notes that, despite less resources and compensation, many advisers in are finding parts of their business more time-consuming. More than half (61%) of financial advisers reported that more time is required in the last year for meeting with clients in person or on the phone. More than half (56%) of advisers have also seen longer sales cycles, or the time it takes to close new business, according to the FRC data.
Another 41% of respondents reported that more education and research is needed when selecting new investments. Because of changes in the marketplace and questions around transparency, products like mutual funds and variable annuities “require more homework than they used to,” said Rorick.
The study, conducted with Harris Interactive, surveyed about 1,200 advisers in April and May.
“The State of the Financial Advisor Marketplace” can be purchased at frcnet.com .