Thinking About The 'Concentration of Assets' In the Advisory Industry

Wednesday, November 02, 2011 07:41
Thinking About The 'Concentration of Assets' In the Advisory Industry

Tags: high net worth | prospecting

As big advisory firms get bigger and the rest of the industry gets more fragmented, I couldn't help but think of all the rhetoric about income and wealth disparity over the last few decades.

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The phrase "the concentration of assets in the wealth management industry continues to increase" set me off, because it sounded so much like what's going on in the country politically right now.


As the number of advisors shrinks, each advisor handles, on average, more client money.


But while the goal is often to focus on fewer, bigger accounts, that is not always the reality for every advisor.


Many advisors are taking a broad approach, using technology and innovative office structures to serve a lot more small accounts more efficiently.


Others are simply fighting hard for every dollar they can get.


And the wirehouses have been capitalizing on their national brands -- despite frequent scandals and embarrassments -- to chase the richest Americans up the social pyramid.


The typical wirehouse advisor now serves $94 million in client assets, up 10% over 2009 levels. 


"Hybrids" and traditional RIAs have, on average, $63 million to $64 million in AUM apiece. And independent brokerage affiliates are down in the $18 million range.


Now I plead a lot about the mass affluent market because I see the typical American family as vastly underserved and in desperate need of solid advice. It would be a decent -- in all senses of the word -- career to focus on these people, if the business model could support it.


What numbers like this make me wonder about is whether the "mass affluent" market is in better or worse shape now than it was three years or five years ago. 


If, as the Occupy Wall Street people have it, the middle class has lost ground, then this market is no longer as rich an opportunity as it was.


Efficiencies need to be even bigger to make it work and each account will simply have to work harder to justify taking the time away from prospecting for and retaining a high-net-worth client instead. 


In that case, the question is how independent advisors who want to grow should orient their business to compete for the rich who are getting richer.


Naturally, if the middle class is alive and well -- as the banks are hoping and might actually believe -- then the opportunity is clear. Betting on small business is a win/win scenario.


How are you doing it?

Comments (2)

To the banks, these folks are just a "unit". There is always pressure to sell, sell, sell ( or cross sell ). Then you have the annuity sales pitches (both in and out of the bank setting) that are not required to purvey any truth. It's harder and harder to gain/keep ground in this space. The good news is that once people find you, they don't tend to leave. It's less personal, but not to the transaction level of the bank. And, models, models, models, and other forms of automation are the only way to build efficiency. The scandals at the big banks, wirehouses, hedge funds, etc. are making life harder for those of us who EARN our living HONESTLY. I don't know why people keep going back to an abusive relationship, so to speak.
vguettlein , November 02, 2011
Thanks for this. It puts a pretty bittersweet spin on the new marketing term of the UMH or "unified managed household," which I think we used to call "the American family."

I like models, but don't know how broadly they scale. Enough for good advisors to make a comfortable living serving a lot of clients? Sure. Maybe the secret is recognizing that's enough.
ScottMartin , November 03, 2011

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