Data & Research May 2, 2008

Advisers Say Extravagance, Procrastination Hinder Retirement Savings

Financial advisers are optimistic about both their business and the economy, yet think the priority of the next president should be bolstering the weak economy.
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The majority of advisers expect their business to grow by more than 10% and expect new relationships to be the main source of growth, says the Brinker Barometer, a gauge of financial adviser confidence with the economy, retirement savings, investing, and market performance by Brinker Capital. The overwhelming majority of advisers (86%) attribute new business to referrals.

Obstacles to Retirement

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The largest chunk of advisers (20%) said extravagant lifestyle is the largest obstacle to their clients’ retirement savings, and procrastination received the second largest number of responses (18%). Although most advisers said almost all of their clients will not have to work past retirement, one-quarter of advisers said almost 35% of their clients will, the results show.

The majority of advisers surveyed (69%) said their clients want access to consolidated account information and third-party products through their adviser. A smaller number said their clients want to use a single financial provider (15%) or want to maintain separate reporting and relationships with several other providers (13%), the survey says.

Optimism for Economy

Financial advisers continue to be optimistic about the U.S. market and economy, although 79% said they agree with Warren Buffet that the U.S. is “essentially in a recession,” the report says.

“The first quarter’s Barometer results show some interesting differences between the still-optimistic views of financial advisers contrasted against market volatility, escalating oil prices and inflationary fears,’ said John Coyne, president of Brinker Capital. “In fact, 64% of our financial adviser respondents say they are either “highly confident’ or “somewhat confident’ about the U.S. economy, and 66% feel the same way about the financial markets. What’s remarkable is that these sentiments haven’t changed in any discernible way since we began issuing the Barometer a year ago.’

Political Snapshot

When asked what the most immediate priority of the new president should be, 48% of respondents said “bolstering a weak economy,’ followed by 16% who noted “winning back America’s respect in the eyes of the world,’ and 13% who said “shoring up a falling dollar.’ Other notable responses included “capping gas prices at the pump,’ “Iraq troop reduction’ and “healthcare reform.’

Asked to name the areas in which they would most welcome federal intervention, 65% of advisors responded with “supporting a weakened dollar,’ 59% with “stabilizing the financial markets,’ and 31% noting “cutting interest rates before year’s end.’ Other responses included “discourage job outsourcing to foreign nations,’ “regulating gas prices’ and “providing financial relief to embattled homeowners.’

While John McCain is the overall candidate of choice among financial advisers, Barack Obama is the favored Democratic choice. While 22% of advisers reported in Q4 of ’07 that a Democrat in the White House was their “single greatest economic worry,’ 54% would favor Obama over Hillary Clinton, the survey says.

The Brinker Barometer results are based on responses from 266 advisors affiliated with insurance companies, independent broker-dealers and in sole practice. Of the advisers surveyed, 69% were brokers affiliated with insurance company; 24% were independent advisers; and 7% were independent broker/dealers.


Data & Research May 1, 2008

Recruiting Young Advisers Requires Less Traditional Approach

Fewer young advisers are entering the field, and those that do are more interested in less traditional, sales-based routes.
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The financial adviser industry should focus on programs that bring in new advisers in order to combat the current shrinking, aging talent pool, says the Cerulli Edge Advisor Edition—Recruiting Issue.

As the U.S. adviser force ages and shrinks, fewer young people are choosing the industry. More than half of the adviser population is over 50 years of age, the report says, while only 3% are under the age of 30 (See B/Ds Dealing With Dwindling Numbers of Advisers).

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Advisers are entering the field older than in the past. In the 1980s, more than 62% of advisers were under age 30 when they entered the industry, while so far this decade only 53% of new advisers have been under age 30 when they started in the field, the data show.

Spurning Tradition

Recent graduates are more attracted to the technical aspects of planning as opposed to the sales aspect, the report says. Many prefer the route of less traditional, sales-based channels of advising.

In the 1960s, 75% of advisers entering the field went to national, full-service firms. So far in the 2000s, that percentage is only 45%. There is a notable growth in other channels, such as registered investment adviser (RIA) firms and banks.

Recruiting Young Talent

Cerulli estimates there are fewer than 100 undergraduate financial adviser programs. Although they operate at capacity, students are not flocking to the major. Many students choose it later in their academic career after pursuing other avenues, the report says.

The lack of interest could be because of the “bad rap’ of the industry as being focused on cold calling, the report suggests. While financial planning is gradually becoming more holistic and team-based, this message has not fully reached the younger generation.

Many firms choose to transition recent graduates into team practices or associate advising positions. The team-based approach is more attractive to recent graduates than the build-your-own-book approach, the report says.

Cerulli suggests more firms should develop the infrastructure to train young talent and assimilate them into established teams. It is also a good idea to establish connections with undergraduate programs in place to absorb new talent. (A list of CFP-registered programs is located here.)


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