When it comes to attracting new clients, same old story for advisers

InvestmentNews/Moss Adams study reveals that firms are doing a poor job of building up their book of business

Oct 9, 2012 @ 3:02 pm

By Liz Skinner

First, the good news: The financial advisory business clearly has rebounded from the recession. The bad news? The recovery may not be built on a stable foundation.

Indeed, a new survey of 436 advisers conducted by InvestmentNews/Moss Adams shows that advisers generally still are struggling with business development — and specifically, attracting new clients.

Adviser revenue increased about 18% on average from 2009 to 2011, while and profitability plumped up 24% in that period. At the same time, assets under management remained stagnant.

Boosts in revenue and profitability appear to have come from the raising of fees — especially for clients with smaller accounts — and a bump-up in adviser productivity, the survey found.

Landing new clients, however, is one area that hasn't improved. The median number of new clients per firm was 14 last year, just as it was in 2009.

“As practices mature, they tend to rely more on existing relationships rather than creating new ones,” said Mark Tibergien, chief executive of Pershing Adviser Solutions LLC, a segment of The Bank of New York Mellon Corp. “This has profound implications for the value of advisory businesses and the willingness for younger advisers to buy them.”

Although 61% of new clients come from referrals, nearly three out of four firms do not have a formal referral process, according to the survey.

Gabriel Garcia, director of Pershing Adviser Solutions, said advisory firms should create a process within their firm to handle referrals from clients and influence centers, such as attorneys and accountants.

“You should have a process for this just like any operational procedure,” Mr. Garcia said. “It's an experience you need to control.”


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