Regardless of your political persuasion, you’re probably a little unhappy at the moment (the moment being Aug. 9). Following the political theater surrounding Congress raising the debt ceiling, and the Tea Party Republicans flexing their newfound muscle in forcing some budget cuts, Standard & Poor’s downgraded the United States’ debt on Aug. 5. The first day that U.S. markets could respond to the downgrade, the Dow dropped 634 points, or 5.6%, while the S&P 500 fell 6.7% as every stock in the index fell. The VIX, meanwhile, closed at 48 on Aug. 8, its highest level since March 2009. Our national political system appears dysfunctional, with our so-called leaders seemingly more interested in making partisan points and making good sound bites than in having a serious debate—even allowing for that now dirty word, compromise—than in directly addressing the big issues the country faces.
As you read these words, however, the markets will have moved on. Whether that move will end up in double-dip territory or a resumption of growth, I don’t know, but the basics of your business will remain the same. You build plans, you manage client expectations, you learn from what the past teaches you and you implement investing, tax, estate planning and charitable giving strategies that provide your clients with a better chance of meeting their goals than if they were on their own.
But to be successful, you can’t just be a market whiz: As you well know, advisors who live only by the performance sword will be bloodied by that same sword. There are plenty of lessons to be learned by some recent research conducted by Investment Advisor’s online counterpart, AdvisorOne, with the assistance of Philip Palaveev, and an advisor benchmarking survey from our partners Dan Inveen and Eliza DePardo (yes, all of them are Moss Adams alumni).
First, the Top Wealth Managers survey, which you can find on AdvisorOne.com in its entirety (and on page 17 of this month’s Investment Advisor), lists the top wealth management RIAs by total AUM, but in looking at the data provided by 370 wealth management firms, here are some of Mr. Palaveev’s takeaways: “While staffing changes may not be a recipe for growth, it does suggest that firms who evaluated their situation and took action may have put themselves in a better position to capture new opportunities.”
As for FA Insight’s annual study (see more on page 52), here are some of its conclusions: “For advisory firms, people represent the critical ingredient for growth as well as building value and effective succession planning. Achieving these objectives, however, will require firms to shore up weaknesses with regard to how they deploy and develop staff. Reflective of growing labor scarcity, compensation levels are on the rise again, retention is at risk, and the source of the next generation of firm leaders is unclear.”
It’s not the big companies—those in the Dow or even in the S&P 500—that drive the economy, create jobs and, dare I say it, make this country great. It’s the small businesses—those that you run—that do so. Finding and retaining talented people who can adapt, no matter the state of the markets and economy, will increase your chances of success.