News

Advisers draw up plans for 2020

1

Issues advisers will spend more time on with clients next year

Politics, regulations and fee pressure are the top concerns of financial advisers, but they have not derailed an optimism about business prospects going into 2020.

[More: Robert Shiller shares his thoughts on the 2020 election and the economy]

More than 78% of advisers have an overall optimistic attitude toward their advice industry businesses in the year ahead, an InvestmentNews survey of 353 advisers showed.

Advisers were less optimistic heading into this year, when 70% were optimistic about their business. The survey, conducted in late November, highlighted plans for hiring across the board for both administrative and client-facing advisory positions.

Nearly 30% of advisers said they plan to hire professionals or executive staff in 2020, and 28% said they will be hiring administrative and support staff.

“We want to add a couple of advisers in 2020, and we also need more administrative staff, so we’re going to get an administrative contract employee to work remotely for us,” said Sarah Carlson, founder of Fulcrum Financial Group. “There’s a lot of money in motion and people are looking for advisers that fit their values.”

Dennis Nolte, vice president of Seacoast Investment Services, is also planning to add an adviser and assistant trust adviser in 2020.

“This is the best year Seacoast has ever had in terms of profits,” he added. “The only big change we’re doing here is there’s a lot more financial planning going on, and a lot less focus on asset management.”

Outsourcing opportunities

With the growing popularity and access to various third-party asset management platforms, the planning industry has more opportunities than ever to outsource investment management services and focus more on holistic planning services.

[More: 2020 elections could help socially responsible investments soar]

However, among the advisers surveyed, outsourced asset management has remained relatively steady at around 40% for the past few years.

This year’s survey showed 39% of advisers outsourcing asset management, which compares to 40% a year ago and 36% two years ago.

Mr. Nolte said the advantages of outsourcing asset management are many, including separating portfolio performance from the services being provided. But he also believes advisers who lean heavily on their own investment management services will be most vulnerable in the event of a major stock market downturn.

“The easiest cost you can cut is somebody trying to beat the market,” he said.

On the subject of advisory fees, more than 87% said they are not planning to lower or raise their fees going into the new year, about the same as advisers heading into 2019. Only 7% of advisers said they plan to raise fees in 2020, which is down from 8.4% a year ago, 12.2% two years ago, and 15% three years ago.

“There’s no impetus to lower fees when everybody’s assets are going up,” Mr. Nolte said. “If the market corrects there will be some fee shopping, and we know we won’t continue to get 1% down the road.”

Nicholas Hofer, president of Boston Family Advisors, agrees that fee-pressure is real and not going away.

“We feel that AUM fees will continue to contract as clients look beyond traditional investment management,” he said. “We are also seeing much more demand for direct investing, private equity, and venture capital investing. So, we will allocate resources to these areas in the near future.”