Growth in the asset and wealth management industry in 2011 and beyond increasingly will be tied to the development of retirement-investment products, according to an executive-search expert.
“One thing we’ve seen is an interesting shift in the course over three years, with private-client-related search work going from 10% to 30% of our practice,” said George R. Wilbanks of Russell Reynold’s asset and wealth-management practice, in a phone interview.
“There is significant search of this search work on the buyside, including at the brokerage firms in wealth management. Granted, the business in this field has shrunk a bit from 2006 to 2010, but it has come back very strongly in 2010, though we’re not quite at 2008 levels.”
In a report released on Nov. 11, “Navigating the New Terrain in the Asset and Wealth Management Industry: Recruiting and Compensation Trends, 2010,” the executive-search firm explains that now is a defining moment for the wealth-management field.
At the retail level, for instance, “The delivery and breadth of retirement investment solutions are being redesigned to address the needs of the next retirement generation,” the report said.
Demand is very strong for retirement solutions, especially so that the mass affluent – those with $500,000 to $1 million in investible assets – don’t run out of money, says Wilbanks
“The twin risks of inflation and longevity need to be addressed,” he explained. “I’m doing lots of wirehouse searches, for example, with a retirement focus – such as a search for Merrill Lynch; which has 700 people focused on retirement solutions. This knowledge basis is really valuable right now.”
For this sector, there’s been a lot of turnover, with the small boutiques gaining market share and the largest national brokerage platforms consolidating, according to Russell Reynolds.
“The exodus of clients and advisors from the traditional large brokerage format remained a challenge to those firms,” the report states. “Winners included boutique private banks, independents and registered investment advisors.”
Key factors in retaining top-producing advisors are open architecture, a strong brand without controversy, and a full suite of support services, such as trust and risk management. “Firms that offered guaranteed income products and alternative strategies also were more attractive to advisors,” the executive-search firm explains.
“In the mass affluent segment, the continued focus was on solutions-based advice under traditional fiduciary standards that included attention to liquidity, longevity and wealth transfer, not just diversified asset allocation,” it adds.
As for the field’s latest mantra: "Boring is the new brilliant" as firms returned to the basics to get business back on track. “In the minds of wealthy clients and advisory talent alike, quality programs were those defined by integrity, transparency and simplicity,” share the report.
“Firms planning for modest (rather than aggressive) growth through the uncertainty of the next several years appeared to be gaining the respect and trust of employees and clients,” it concludes.
The industry continues to consolidate, with the top 20 firms capturing almost 90% of new asset flows, the report says: “Recent consolidation will fuel additional consolidation, as those left behind resort to acquisitions to grow assets. This is especially true in wealth management, where organic growth is more difficult.”
Sadly for the industry, thought, “profitability is not likely return to pre-downturn levels “anytime soon because of the current asset mix, cost structure and existing strategies for growth/investment,” explains Russell Reynolds.
But, on the plus side, “Advisors’ value-added beyond financial planning work and the value of that advice is going up,” said Wilbanks.