3rd Annual Report on The State of Retail Wealth Management

11 March 2013
By Alexei Miller, Managing Partner

Every year PriceMetrix prepares a report on The State of Retail Wealth Management in which we examine multi-year results for select performance drivers of the North American retail wealth management industry.

This report is the most accurate and objective assessment of the industry available: it is based on the aggregated data set comprised of detailed books and records data for over 35,000 financial advisors and 7 million retail investors. Please download the 3rd special edition here.

In 2012, Financial Advisors saw increases in assets and revenues, accompanied by a deterioration of the revenue generated from assets (RoA). Some of the causes of this RoA decrease are:

  • Equity transaction volumes per FA experienced a third year of decline,
  • FAs averaged $46,000 of equity commission discounts, discounts that they can and should reduce,
  • The pace of transitioning to fee based products slowed,
  • Of most concern, the aggregate price level on new fee accounts declined.

On a positive note, FAs reduced the number of households they serve, though only modestly. Our Insights Lab has documented for our subscription clients that a higher percentage of small households in FA books result in greater attrition rates of large households. It is a law of physics that executives can cause their managers to act upon.

What are our clients doing in response? They are:

  • Redesigning their equity commission schedules,
  • Sharing relevant fee benchmarking information with advisors, so they can avoid pricing mistakes,
  • Taking a harder approach to reducing the number of small households,
  • Balancing penalty compensation systems with reward systems, by moving from ‘discount sharing’ to ‘value sharing’,
  • Using Moneyball metrics to better coach their sales forces and improve recruiting results,
  • Training FAs and managers on how to have successful price dialogues with both new and existing clients.

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