Financial advisers are facing tough times, with 40% having to cut back on support staff through layoffs or attrition, a soon-to-be-released report has found.
The report, to be released at the end of July by Boston-based Financial Research Corp., found that advisers have been cutting costs in other areas as well.
Over the previous 12 months, the survey found: 31% of advisers had cut their marketing budget, 29% merged with another firm, 27% reduced compensation structures, 22% lowered payout ratios, 22% increased minimum production levels, 13% restructured, and 10% reduced the number of advisers they employed.
“Advisers have to do much more work just to manage the standard book of business. In a hundred different ways, advisers are between a rock and a hard place,” said Margaret Rorick, a senior vice president and market research director at FRC. “No one's singing a sad song for them, but their life base changed significantly.
FRC based its report on the responses of 1,070 advisers and 167 branch managers who were polled online in May.
When advisers were asked about how they had changed their businesses in the previous 12 months, 61% said they were spending more time meeting with clients, 56% said they had longer sales cycles, 41% said they had to spend more time on research, 22% said they spent more time re-balancing accounts, 20% said they had reduced internal sales support, and 5% said they had access to fewer tools and services.
When the branch managers were asked, 78% said the advisers in their firm were working harder now than they did a year earlier.
In general, advisers' time is being eaten up by meeting with clients and researching new products, Ms. Rorick said. “Advisers are taking more time to understand investments in clients' portfolios and figuring out how to explain the investments to clients,” she said.
In fact, Lauren Lindsay, a CFP and adviser with Personal Financial Advisors LLC in Covington, La., which manages $85 million in assets, said it is meeting with 5% of its clients every month. In addition, it meets with its top clients every quarter and performs an annual review that can take two to three hours.
“We've had days where we've been on the phone until 8 or 9 p.m.,” Ms. Lindsay said.
Her firm is also spending more time with investment managers.
“We're spending a lot more time doing due diligence,” Ms. Lindsay said. “It's not that we didn't do it before, but we're doing even more now.”
While they're doing more work, Mr. Rorick said, advisers are facing pressure from clients and prospects to lower fees.
Steve Martin, an adviser and owner of Martin Wealth Management LLC of Fort Collins, Colo., said he has had no choice but to accept new clients who wouldn't pay his annual retainer. His firm manages about $12 million in assets.
Previously working only with clients who paid an annual fee of $1,500 to $5,000, Mr. Martin now accepts clients who will pay him $500 to $1,500 per project. Since the work is time-consuming, he hopes that clients ultimately realize the value of his services and hire him for all their financial services needs.
Mr. Martin acknowledges, however that while his revenue per client has declined, the lower fees have attracted more clients. Previously, between 50% and 60% of prospects became clients, and now about 90% do, he said.
“Newer clients are more concerned about their expenses, and I'm working on helping them with that,” Mr. Martin said.
Larry West, a CFP with West Financial Consulting Inc. in Huntsville, Ala., said client meetings are consuming a lot of time at his firm, which manages $50 million in assets. “I've made a lot more contact with clients,” he said. “It's been emotionally draining on everybody, advisers in particular.”
E-mail Lisa Shidler at [email protected].
