Practice Management

Advisers: Hefty asset growth in 2013

Dec 16, 2012 @ 12:01 am

By Jeff Benjamin

Financial advisers are predicting a stronger return on assets next year, despite falling short this year, according to the latest research from Russell Investments.

The results of the quarterly survey, released last Thursday, show that advisers expect 2013 to bring an 8.4% growth in ROA: a company's ratio of revenue to assets under management.

The forecast is somewhat surprising, considering that survey respondents, on average, said they expect to see a 7.6% return on assets this year, but only realized 7.2% growth in 2012.


Russell's Financial Professional Outlook survey, which ended the first week of November, includes responses from more than 200 financial advisers from 93 national, regional and independent advisory firms.

“Return on assets is one important metric for goal setting around business growth, alongside other key indicators, such as recurring revenue, total revenue per client, assets under management per client and clients per full-time employee,” said Sam Ushio, practice management consultant at Russell.

“ROA provides valuable insight into the revenue efficiency of the adviser's asset base,” he added.

While ROA growth among fee-based advisers is driven primarily by new clients, increased pricing, performance and moving cash off the sidelines, at the broker-dealer level, growth is coming from a transition away from commissions and toward fee-based advice, Mr. Ushio said.


“The survey said the No. 1 strategy was to deepen the relationships with clients,” he said. “Transaction-based advisers weren't always as oriented toward the relationship, but what we're seeing now is the evolution of the average adviser because they're starting to get it.”

Among the advisers surveyed, 62% said they are focusing on deepening client relationships to help increase ROA across their businesses. Mr. Ushio said advisers understand that many wealthy investors diversify by working with more than one adviser, but that by strengthening client relationships, an adviser can encourage clients to consolidate their assets. Twitter: @jeff_benjamin


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