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March 27, 2017

THE BIGGEST THREAT TO THE FUTURE OF THE FINANCIAL ADVICE INDUSTRY?

Fantastic Opportunity to Acquire $30 Million Over 5 Years | Queenston Consulting

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fletcherm

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There are many threats right now to the future of the Independent Financial Advisor in Canada.
  • CRM2 is forcing change to the business model of Independent Advisors and not always for the better
  • Firms ARE NOT hiring, training and hand holding new advisors
  • Pressure from Dealers to have a fee based business
  • Dealers are squeezing advisors especially new smaller businesses – some advisors are only earning 25% of the revenue they generate
  • Average age of Advisors is going up without younger advisors to take their place
The biggest threat in my mind …… Independent Advisors are not prospecting and cultivating younger clients. Even the younger advisors are prospecting older clients. We know that a book of 35 years old will grow faster than a book of 65 years old but few Independents are prospecting the younger clients. The average age of clients is now in the mid 60’s.
WHY? The pressure is from Dealers and one’s paycheque to generate revenue more that any time in the Industry’s history. Now is more competitive than ever. Products are officially commodities. Every corner has product. Advisors, even young ones, want and need large accounts – large accounts are owned by older clients. Young advisors need to make money or they will leave the Industry.
Where are younger clients going? Robo advisors are gaining market share especially in the US. Banks are eating Independent’s lunch. They not only nurture young and well educated advisors but they are also nurturing young and well educated clients. Advisors and clients are groomed and the best ones are moved up to the IIROC Dealers. (Not to mention that Bank branches are the most aggressive on the street. They will do anything to get clients out of everything owned and into proprietary products – the goals and objectives given to Bank advisors are amazingly aggressive. Witness a few months ago when Scotia MacLeod canned any advisor doing under $650,000 in production. 30+ year devoted Scotia advisors managing $60 – 70 million were shown the door.)
Einstein said doing the same thing over and over and expecting a different result is the definition of insanity. I see very few positive changes in the independent model in Canada. Most manufacturers, middle of the distribution system and advisors continue to do the same thing they have been doing for 20+ years. Come on Industry let’s not be considered insane.
Solutions? In the US Independent firms manage 1000s of clients and billions of AUM. Why not follow their lead. Here is what I think has to happen on the independent side:
  • Advisors need to get bigger – manage more assets and generate more revenue through partnerships and team building.
  • These larger firms need to eliminate the middle man (Dealers etc) as much as possible with different platforms and/or their own Dealer. There are no compliance issues if very few managing very much are doing the same and the right thing. Or even better is to outsource the investment decisions and manage client relationships and a total wealth management program. In the US most firms with less than $1 billion outsource the investment decisions.
  • These larger firms need to develop and nurture younger well educated hard working advisors who will learn the workings of the products and the industry and be given the time to recruit their peers as prospects.
  • Every senior advisor has to have an advisor with a longer time horizon in at least a working relationship. This will serve to protect the value and protect the relationship of clients. In addition, we know that older advisors do not cultivate relationships with the next generation of their clients.
Queenston is building a data base of advisors wanting to team up with other advisors. We have many advisors with a longer time horizon and many advisors with less than a ten year horizon. Our job is to put qualified and interested candidates in front of each other. Please email [email protected]
for more information about demographics of advisors and clients.

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