Advisors Turning Independent Study. February 2012

Transcription

1 Charles Schwab Advisors Turning Independent Study February Charles Schwab & Co., Inc. ( Schwab ). All rights reserved. Member SIPC. Schwab Advisor Services includes the custody, trading and support services of Schwab. (# ) 1481)

2 Table of Contents Methodology 3 Insights for RIAs to Consider When Hiring Breakaways 4 Detailed Findings 5 Current State for Advisors 6 Making the Jump to Independence 15 Profile 26 2

3 Methodology What An online survey was fielded by Koski Research. The completion time for the survey averaged 10 minutes. When The study was conducted from December 3-18, completed interviews among U.S. financial advisors who: Manage a minimum of $10 million in client assets Have been providing advice to clients for at least two years Who Do not work for a registered investment advisor (RIA) firm or are an employee of Charles Schwab & Co. Results are described for total respondents and by sub-groups including age, level of interest in becoming an RIA, and knowledge of someone who has become or is considering becoming an RIA. 3

4 Insights for RIAs to consider when hiring breakaways For advisors at large firms, job security is a concern. Two-thirds (67%) feel there is generally less job security for them than there used to be, and close to half (48%) feel that their position at their firm has become less secure during the past five years. Life at large firms can be difficult. Substantial numbers of advisors report that during the past five years employee morale at their firm and their income potential have worsened. Advisors face challenges in meeting their clients goals. Growing their book of business, their compensation tied to sales goals, and corporate goals prioritized over client goals, are challenges that over half of advisors feel in trying to meet clients goals. Clients loyalty lies with the advisors, not the firm. Eight in ten (78%) advisors say their clients are more loyal to the advisor than the firm, and advisors believe that seven in ten clients would follow them if the advisor went to another firm. Becoming an RIA is compelling to many. Half of advisors (51%) say the idea of becoming an RIA is appealing appealing. Breaking away continues. Three out of four (76%) advisors believe that there will be a continued increase of advisors leaving large firms for RIA firms. What advisors would do if an RIA recruiter contacted them? 62% 61% 58% 46% Conduct internet searches to Talk to people they know to find Agree to speak with a Schedule a meeting with the learn more about the RIA f irm out more about the f irm representative of the RIA f irm recruiter 4

5 Detailed Findings

6 Current State for Advisors

7 Looking back over the last five years, advisors say that it is more difficult to achieve clients goals today, and just over half say that 2012 will be more difficult than 2011 Meeting clients financial goals During past 5 years compared to today 2012 versus 2011 Q1 Looking back at the last five years, is it more or less difficult for financial advisors to meet clients financial goals today? Q2. In 2012, do you expect it will be more or less difficult for financial advisors to meet clients financial goals than in 2011? (Base: All advisors = 201) 7

8 Many agree there is less job security in general for advisors and for themselves Less job security for financial advisors Generally less job security for advisors than there used to be Advisor s current position at firm less secure in past 5 years Q8. In general, do you feel there is less job security for financial advisors than there used to be? Q9. Do you feel your position at your firm has become less secure in the last five years? (Base: All advisors = 201) 8

9 Almost half of advisors say employee morale has worsened in past five years; almost a third say income potential and turnover Worse/Same/Better at advisors firms in past five years 45% 32% 30% 22% 22% 21% 19% 19% 17% 17% Worse 38% 42% 56% 50% 41% 69% 58% 65% 54% 51% Same Better 17% 26% 14% 28% 37% 10% 23% 16% 29% 32% Employee morale at firm Income potential Amount of turnover in financial advisors at your firm Quality of the Firm's financial management stability of firm Amount of turnover in C- level executive management at your firm Commitment of your firm's leadership to help you grow your book of business Having clearlydefined job performance objectives from senior management Client satisfaction Firm reputation Q10. Please select whether it has become better, is the same, or has become worse at your firm in the past five years. (Base: All advisors = 201) 9

10 Advisors face many challenges from their firms, particularly on compliance and pressure to grow their book of business Challenges advisors face in helping clients be financially successful 79% 65% 55% 52% 48% 38% 25% Agree Neither agree nor disagree 22% 21% 25% 13% 8% 20% 15% 23% 27% 27% 37% Disagree Increased focus on compliance 10 Pressure from firm management to grow book of business Advisor compensation tied to sales goals Corporate goals Losing assets to Too much focus taking priority over client goals other firms and advisors on presenting proprietary or specific products Q3. How much do you agree or disagree that each of the following are challenges advisors face in helping clients be financially successful today? (Base: All advisors = 201)

11 Younger advisors are more likely than older advisors to report certain challenges Challenges advisors face in helping clients be financially successful (Advisors by age: Under 40 vs. 40+) By Age Q3. How much do you agree or disagree that each of the following are challenges advisors face in helping clients be financially successful today? (Base: Advisors by age, under 40 vs. 40 and older: 72/129) = indicates a significant difference at the 95% confidence level 11

12 More advisors are committed to their clients over their firm; over half would look for a new position if their clients left Commitment of advisors: Serving clients vs. firm What advisors would do if clients left due to a firm-related issue Find a new position elsewhere 53% Stay with the firm 47% Q12. How much do you agree or disagree with the following statements? Q7. For you personally do you feel most committed to.? Q6. If a number of your clients decided to leave your firm due to a firm-related issue out of your control, would you? (Base: All advisors = 201) 12

13 Advisors say that clients are loyal to advisors and would follow them if advisors left their firms Loyalty among clients: To advisors or the firm What clients would do if advisors left their firms Q4. Are clients served by financial advisors today typically more loyal to the firm or to the advisor? Q5. If you were to leave your firm, would most of your clients stay at your firm or follow you to your new position? (Base: All advisors = 201) 13

14 Compared to older advisors, younger advisors feel clients are more loyal to firms than they are to advisors Loyalty among clients: To advisors or the firm (Advisors by age: Under 40 vs. 40+) What clients would do if advisors left their firms (Advisors by age: Under 40 vs. 40+) Q4. Are clients served by financial advisors today typically more loyal to the firm or to the advisor? Q5. If you were to leave your firm, would most of your clients stay at your firm or follow you to your new position? (Base: Advisors by age, under 40 vs. 40 and older: 72/129) = indicates a significant difference at the 95% confidence level 14

15 Making the Jump to Independence

16 Three out of four anticipate the trend of advisors leaving large firms for RIA firms to continue Future of advisors making the jump to RIAs Q26. There s been a lot of talk in the industry news about financial advisors at large firms moving to independent RIA firms. How much movement do you expect in the next five years of advisors moving from larger firms to RIAs? (Base: All advisors = 201) 16

17 Half find the idea of becoming an RIA appealing, with younger advisors finding it even more appealing than older advisors Appeal of becoming an RIA Extremely Somewhat Advisors under 40 years old are significantly more likely than those 40 and over to find the idea of becoming an RIA appealing (65% vs. 43%). Q18. How appealing is the idea of becoming an independent RIA at some point in the future? (Base: All advisors = 201) 17

18 Advisors who are interested in becoming an RIA feel more pressure to grow their book of business, a misalignment of corporate goals and pressure to present proprietary p products Challenges advisors face in helping clients be financially successful (By level of appeal in becoming an RIA) Becoming an RIA Q3. How much do you agree or disagree that each of the following are challenges advisors face in helping clients be financially successful today? (Base: Advisors by appeal of becoming an RIA = 102/69) = indicates a significant difference at the 95% confidence level 18

19 Those who find becoming an RIA appealing are explaining more to their clients because of Wall Street and see smaller firms as more client-focused Agreement with statements regarding clients (By level of appeal in becoming an RIA) Becoming an RIA Appealing Not appealing 79% 65% 74% 49% The publicity connected with Wall Street firms has made me have to explain more in conversations with clients Smaller independent firms are often seen as more client-focused Q12. How much do you agree or disagree with the following statements? (Base: Advisors by appeal of becoming an RIA = 102/69) = indicates a significant difference at the 95% confidence level 19

20 Three in four would take some form of action if a recruiter contacted them on behalf of an RIA firm; those who find becoming an RIA appealing are more likely to do at least one of these Actions advisors would likely take if a recruiter contacted them on behalf an RIA firm Group Likely to do at least one of these things Total 77% Advisors who find the idea of becoming an RIA appealing Advisors who do not find the idea of becoming an RIA appealing 92% 49% Q21. If a recruiter for an independent RIA firm approached you to discuss the benefits of going independent, how likely would you be to do the following? (Base: All advisors = 201) 20

21 Over half feel the benefits of joining or starting an RIA firm would be a larger income and the freedom of running their own business Benefits and challenges of joining/starting an independent RIA firm Benefits Challenges Potential for a larger income 56% Time and effort required to transition to a new business 61% Freedom that comes with running own business 52% Access to legal and compliance support Time and effort required to run a new business 60% 56% Ability to customize client service/prioritize client needs 51% Availability of marketing and sales support 43% Ability to hand-pick their team Offer a broader set of investment products and services 35% 32% Ability to hire and retain a quality team Ability to choose the appropriate technology Uncertainty about how to maintain my commission business 38% 38% 38% Q22/23 Which of the following, if any, do you see as the potential benefits/challenges of joining or starting an independent RIA firm? (Base: All advisors = 201) 21

22 Advisors in this study get close to half of their income from commissions; most would plan to keep some if they became an RIA Sources of current income Plans for commission-based business after becoming an RIA (Advisors with commissionbased business) Q24. What percentage of your current income is generated from an asset-based management fee and what percentage is generated from commissions? (Base: All advisors = 201) Q25. If you were to become an independent RIA, would you? (Base: Advisors who have at least some (1% or higher) income generated by commissions = 154) 22

23 Profile

24 Profile Level of client s assets under management $10M to less than $100M 50% $100M to less than $250M 21% $250M to less than $500M 11% $500M or higher 18% Length of time providing financial advice to clients Less than 5 years 13% 5 to less than 10 years 22% 10 to less than 15 years 18% 15 to less than 20 years 11% 20 to less than 25 years 13% 25 years or more 22% Role with current firm Investment advice 47% Investment management 34% Client service 18% Title/Position at current firm Financial advisor 43% Wealth manager 24% Financial consultant 15% Broker 8% Financial planner 6% Other 4% Length of time at current firm Less than 2 years 8% 2 to less than 5 years 23% 5 to less than 10 years 32% 10 years or more 37% MEAN 9 years Income in 2010 Less than $100K 29% $100K to less than $150K 23% $150K to less than $200K 12% $200K to less than $250K 6% $250K or higher 21% MEAN $190K Age Under 40 (NET) 36% Under 30 12% 30 to under 40 24% 40 and older (NET) 64% 40 to under 50 22% 50 to under 60 25% 60 to under 70 13% 70 or older 4% MEAN 47 Gender Male 66% Female 33% Prefer not to say 1% Base: All advisors =