From the November 2009 issue of Investment Advisor • Subscribe!

Advisors Need to Think More Broadly, Act More Creatively

In 10th iteration of Rydex AdvisorBenchmarking study, lessons from the crisis

One of the several takeaways from Rydex|SGI's 10th annual AdvisorBenchmarking study of RIAs is that advisors "need to think more broadly and more creatively" in the wake of the markets and economic crisis, counsels Maya Ivanova, senior market research manager at Rydex|SGI, as their focus has shifted, of necessity, from growing their firm's assets under management to simply retaining clients and their assets. The more-than-50-questions survey of 561 advisory firms, conducted online from February to May of this year, found that the top firms increased their proactive client communications and more sharply defined their market niches to help survive the storms of 2008, Ivanova said in an interview.

While the RIA firms in the survey reported an overall AUM decrease of 12% in 2008, the top firms' approach led them to report growth of 4% in assets for the year, Ivanova said. Despite the challenges of 2008, 63% of total respondents said they are not making any changes in their practices, and 82% of advisors are counting on referrals from existing clients to drive growth over the next five years.

Thirty-one percent of advisors said they had conducted staff layoffs in 2008, while 15% said they had reduced compensation for administrative and support staff, and 14% said they had cut principals' compensation.

When it comes to marketing, only 36% of respondents said they had a marketing plan in place, and client acquisition and marketing were listed as the top areas in which the advisors said they needed to improve.

When asked to prioritize threats to their businesses, respondents listed: finding new clients (88%); communication with clients (79%); and the impact of the bear market as the most significant threats.

Further findings from this and previous Rydex AB surveys will appear in the next two issues of Investment Advisor.

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