Seasoned Financial Advisors Needed
The current economic downturn has led to a decline in assets under management and a corresponding drop in revenue for firms in the financial planning and advice industry. It has also led to a reduction in new potential revenue inflows into funds under advice due to a projected decline in disposable income.
Since industry profitability and financial advisor productivity (due to spending more time reassuring clients) are expected to decline, experienced financial advisors currently are in very high demand.
There is high demand for experience financial advisors since they have higher assets under management, higher productivity, and significantly lower training costs. They also are more likely to receive new business from new clients interested in better asset management and from baby boomers interested in estate planning and retirement services.
Experienced financial advisors provide complex services to corporate and high net worth clients – market segments responsible for over 57% of revenue in the US financial planning and advice industry. This helps the advisors produce large amounts of revenue from well established client bases.
Factors such as retirement and industry recruitment cut backs in early 2000 have contributed to a shortage of seasoned financial advisors; although employment in the financial planning and advice industry has been growing.
Thus consolidation has been taking place in this industry since acquiring advisors via acquisitions instead of hiring and training more inexperienced advisors (with fewer clients and lower assets under management) was more appealing to financial planning and advice firms.
Recently the addition of online access to advisory services, call centers, and teams (groups of advisors serving clients) has also occurred to decrease costs via greater economies of scale as a result of consolidation.
The financial planning and advice industry’s fortunes are connected to the wealth of the population which is projected to take time to recover. Likewise, what else could firms do to overcome a shortage of seasoned financial advisors and control costs within this period of declining revenue?