2012 a swell year in advisory realm

Mar 17, 2013 @ 12:01 am

By Andrew Osterland

Financial advisers increased both their assets under management and their production figures last year, according to an annual report produced by practice management software maker PriceMetrix Inc.

After a down year in 2011, average adviser assets increased 9% to $80.8 million and average revenue per adviser increased 2% to $550,000.

PriceMetrix aggregates data from more than 35,000 advisers managing about $3.5 trillion for more than 7 million investors.

“Financial advisers can toast to a successful 2012,” said Patrick Kennedy, co-founder of PriceMetrix and vice president of product and client services. “They reached record levels in assets and revenue, and for the first time in three years, both assets and production increased.”

The most positive finding from the annual analysis was that advisers achieved that growth while reducing the number of households they served, Mr. Kennedy said.

The average number of households served by the advisers that PriceMetrix tracks fell 4% to 159 last year. In 2010, the average adviser had 182 household clients.

All the client figures showed positive momentum.

The average assets of household clients rose 13% to $491,000, and the proportion of clients with more than $250,000 in assets rose to 38% of total assets managed, from 34%. Revenue per household was up 4% to $3,300.


“The downturn may have pushed advisers to look more critically at their practices,” Mr. Kennedy said.

“They're choosing to have fewer and deeper relationships with clients,” he said. “They now have more capacity and are delivering more services to those clients.”

The decline in retail-equity trading volumes, however, has continued to affect adviser revenue.

PriceMetrix tagged the situation as a key theme for last year.

The average number of equity trades per adviser fell 10% to 346, and the average principal traded per adviser decreased 13% to $7.7 million. The average discount to the full-service cost of trading offered by advisers remained 35%.

Equity trade volumes declined dramatically after the financial crisis and have yet to recover.

One reason for that decline is the continuing transition to fee-based pricing models. Fee-based assets last year grew to 28% of total assets, from 26%, and accounted for 45% of average adviser revenue, up from 43% in 2011 and 39% in 2010.

The average return on fee accounts, however, fell 7% to 1.06% of assets.

“Increasingly, we see advisers are concerned that to attract new business, they need to reduce the price of their fee-based offerings,” Mr. Kennedy said. “It's troubling.”

The average return on assets for new fee-based accounts fell for all household sizes, with the biggest decline (-18%) for households with more than $1 million in assets.

“The foundation is there for stabilization or a turnaround in price levels,” said Mr. Kennedy, who concedes that raising prices is a tough topic of conversation with clients. “We help them by showing the success of advisers who've chosen to do it.”

aosterland@investmentnews.com Twitter: @aoreport


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