It's early in the game, but independent advisers appear to be winning the competition to lure retirement assets, according to the management consulting firm McKinsey & Co.
"Independents have been the best at delivering the needs of pre-retirees and are taking the lead at doing more planning and making it more comprehensive," said Joanna Rotenberg, a Toronto-based partner with the firm, which is headquartered in New York.
She based her comments on the findings of a survey of consumer attitudes toward retirement and financial firms that McKinsey conducted in March 2007 among 3,673 consumers and released at the recent Retirement Income Industry Association annual meeting in Miami.
Ms. Rotenberg noted that if wirehouses don't make changes, they're at risk of losing assets to the independent financial advisers, registered investment advisers and independent broker-dealers who are better poised to attract retirement assets.
She estimated that independents, a category by her definition that also includes independent banks, control 43% of retirement assets. That compares with the 39% held by conventional brokerage firms and the 18% held by insurance agents, bankers and other financial companies.
"Independents are more flexible, and others are more rigid," said Francois Gadenne, chairman of the Boston-based RIIA. "The RIAs are winning."
More important, he said, is what wirehouses must do to compete.
Many large brokerage firms have been building their war chests and aren't about to let retirement assets pass them by, said Scott Smith, a senior analyst with Boston-based Cerulli Associates Inc.
He predicts that wirehouses will come out ahead in the long run but agrees that independents have taken the early lead.
"There's growth in retirement income, and independents may be getting more than their fair share now, but it's early in the game," Mr. Smith said.
Independents say their ability to focus one on one with clients and establish relationships is the basis for their success. They say brokerage firms often impose tight restrictions and requirements on what their advisers can do.
Brokerages counter that they have the strength to succeed in the long run. The competition to attract retirement assets is just beginning, and larger companies are well-equipped to capture these assets, said Bob Seaberg, managing director of global wealth planning for Smith Barney, a unit of New York-based
Citigroup Inc.
"When push comes to shove, you have to have the resources," he said. "One of the problems I'd be concerned about, if I were a consumer, is the staying power of the institution my adviser is attached to."
Smith Barney manages about $1.5 trillion in assets.
MORE EDUCATION
Mr. Seaberg said his firm has made significant strides in recent years educating its 14,000 advisers about retirement income strategies and the importance of the client relationship.
"This is a long horse race; it's not a sprint," Mr. Seaberg said.
Merrill Lynch & Co. Inc. of New York, whose retirement group manages more than $433 billion in assets, is also focusing on client relationships, according to Stephen Mitchell, the group's Pennington, N.J.-based director of investor education and planning tools.
"Independents have built their model around
financial planning; full-service brokerage has been less focused on planning and more focused on product," he said, noting that Merrill, which has more than 15,000 advisers, has begun to focus more on planning solutions and adviser training.
"What the independents may gain in the ability to focus on high touch, they lose in the level of corporate support that Merrill can provide," Mr. Mitchell said.
The reason independents are winning so far, Ms. Rotenberg said, is because they deliver advice simply. As a result, almost half of clients at independents have consolidated assets at those firms over the past three years, and another third surveyed said they expected to do so in the near future.
"Independents have done a nice job of developing [trusting] relationships with clients, which is no different from what we're trying to do," said Bob Reid, president of the retirement-and-investment-products group at Charlotte, N.C.-based Wachovia Corp., which manages $250 billion in individual retirement account assets.
The bank also has increased its retirement income efforts.
"We have access to the best products and services available. We're here to support the financial adviser in that quest, and I think that's a huge benefit," Mr. Reid said.
In contrast to the muscle of huge banks and wirehouses, independent advisers have greater flexibility and can initiate new ideas quickly, said Jeff McAnarney, senior vice president of marketing with VSR Financial Services Inc., a broker-dealer in Overland Park, Kan., whose advisers manage about $10 billion in assets.
"Independents are faster and have more flexibility," Mr. McAnarney said. "Wirehouses or large regionals will drag their feet a bit."
The conflict between independents and wirehouses is nothing new to Richard E. Reyes, a certified financial planner with Wealth and Business Planning Group LLC in Maitland, Fla. His firm manages about $50 million in assets.
"They're in a constant tug of war," Mr. Reyes said.
Lisa Shidler can be reached at [email protected].
