November 15, 2012

Sales Capacity Is Leading Growth Challenge for Advisors

Independent agents, RIAs older and more experienced than other channels

One of the main challenges facing advisors is sales capacity, a report by LIMRA and McKinsey & Co. found. The report, released Tuesday, found that even as advisory sales forces are aging, they are growing less satisfied than in previous years.

Most advisors are 50 or older, the report found, especially among independent agents and RIAs. Approximately two-thirds of advisors in each of those channels were over 50, and 58% of advisors at independent broker-dealers were over 50. Banks had the smallest concentration of advisors over 50 with 29%.

Independent agents aren’t just older, they’re more experienced. Over half of independent agents have over 25 years of industry experience. Although RIAs had a similar age distribution, just 37% had 25 years or more of experience.

Advisors are looking for growth more than high payouts, according to the survey. Twenty-seven percent said they stayed with their current firm because they could see no better opportunity for growth. The same percentage said they left a firm for because they thought they could find a better opportunity for growth. Thirteen percent of advisors said they stayed with their firm because they were happy with their compensation, and 13% of advisors said they left a firm because they thought they could get more somewhere else.

The survey suggested that by improving in four areas, advisors can drive growth.

First, advisors need to focus on teaming. The survey suggested advisors who gross $200,000 per year could add $30,000 by regularly partnering with other advisors.

Also, client specialization is an area in which advisors need to develop best practices. By targeting a specific group of clients, advisors could add $26,000 in annual production.

Retirement planning is vital to advisors who want to grow their practice. By creating retirement plans for an additional 30% of their current clients, advisors could gain $9,600.

Finally, to drive growth, advisors must understand their clients and what’s going on in their lives. Advisors could add $7,333 in annual production be increasing their awareness from five to eight life events for each of their clients.

The study found insurance products were less valuable to productive advisors than investment products and advisory solutions. In 2004, insurance products accounted for a quarter of advisors total gross revenues. In 2012, that mix fell to 20%.

Advisors don’t see one area of support as significantly more critical than another. Twenty percent said point-of-sale support was most critical to their practice, while 19% said both technology management and coaching were most critical. Just 14% said marketing services were most critical, and 12% said the most important area of support was in processing new business. Furthermore, advisors rated the quality of service they received as mediocre across the board. On a five-point scale where five indicates the best quality service, no area scored higher than 3.9 (remote sales support), and the lowest ranking was 3.3 (marketing services).

Finally, although 19% of advisors said technology support was the most critical area of support in their practice, most reported an interest in using mobile technology and social media, if they weren’t using it already. In fact, the report found that advisors’ use of Skype and other video technologies is expected to quadruple in the next three years. Social media use is expected to double.

Currently, social media use is relatively low compared to mobile technology. Just 11% of advisors said they use social media to communicate with existing clients and 13% use it to prospect. Fifteen percent said they use social media to promote their practices and 16% are using it to collaborate with other members of their team. About two-thirds of respondents said they weren’t using social media for any of those tasks.

When it comes to mobile technology, however, advisors are far more interested. Almost three-quarters say they use a smartphone to access information and 18% said they would like to do so; 60% said they use a tablet and 28% would like to. Advisors were more likely to prefer a tablet for presentations or training however. Almost a quarter said they use a tablet for training or continuing education, and 35% use one for presentations. By comparison, 14% of advisors use a smartphone for training and 19% use one for presentations.

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