Financial advisors have rebounded from the 2008 crisis but not necessarily from attracting new clients. A new study by Investment News/Moss Adams shows that hurdles still exist for business development and most growth has come from raising fees and increased advisor productivity.
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So why is client acquisition so challenging? As advisors become more seasoned, they tend to rely on existing clients instead of focusing on attracting new ones.
Advisor revenue only increased 18% from 2009 to 2011. Profitability increased 24%.
But there was little growth in assets under management over that period.
The number of new clients year-over-year was the same in 2011 as it was in 2009—14.
Pershing’s director of Advisor Solutions, Gabriel Garcia says firms should develop programs to handle referrals from clients and centers of influence like attorneys and accountants.
Currently, three out of four firms do not have formal referral programs
although the survey said 61% of new clients come from referrals.
Other reasons behind the lack of new clients could be advisors’ reluctance to change their business models to attract younger investors and generational differences with younger family members of existing clients.