Business Is Good, Despite Mixed Feelings on Economy: SEI

Standardized process led to stronger businesses after recession

Ninety-one percent of advisors polled at SEI Advisor Network’s National Strategic Advisor Conference in Dallas said they expected business to be better in 2013 than it was in 2012.

That optimism doesn’t translate to the economy, though. Advisors were cautious about the direction of the economy. Forty-one percent predicted slow but consistent growth, and 40% foresee a near-term correction. Just 13% are digging in for another recession (twice as many as those who expect a near-term return to prosperity).  Federal debt is a major concern, although markets in China and Europe, and the impact of tax increases, were also weighing on the minds of the advisors at the conference.

The reason for that, according to Steve Onofrio, senior vice president and head of sales at SEI, is that the measures they’ve taken following the recession have served to strengthen their businesses.

“Over the past four years, advisors have had to analyze their businesses,” Onofrio told AdvisorOne on Friday. “They knew they had to communicate with their clients and in doing that, put new processes in place.”

Those processes helped advisors standardize their services, Onofrio said. “They’re running more of a business than a practice.”

Outsourcing some functions is another way advisors strengthened their practices, he added. “When they save time by outsourcing, advisors have more time to spend with their clients but they can also offer more services.”

SEI found that nearly 40% of advisors consider themselves a wealth manager, rather than an investment advisor (8%). Thirty-seven percent consider themselves a financial planner, and only 16% customize their approach to each client.

Although about 25% of respondents said they wouldn’t do anything differently to increase revenue in 2013, more than 26% said they would interact more with centers of influence. Acquiring new clients through small events (17%) and by pushing for referrals (14%) were other strategies, but nearly 13% said they would focus on retaining the clients they already have.

Their current clients are already giving them enough to do, the survey found. Nearly three-quarters of respondents said their clients had become more demanding since the recession began, and 70% said they spend most of their time working with existing clients.

Onofrio noted that spending too much time on clients may actually hinder business growth. “Advisors shouldn’t and can’t neglect growth,” he said. “When clients begin taking distributions, the money advisors are managing is going down. They need to replace that every year, and to grow they need to add more.”

Overwhelmingly, the most common reason advisors gave for why their clients stay with them is simply that they trust and like their advisor. Less than 2% of advisors said their clients stay for their investment philosophy or results. The second most common reason advisors think their clients stay with them is their holistic approach to wealth, with nearly a quarter of advisors giving this reason.

Steve Onofrio, SEI Advisor Network“Clients trust them because of the relationship they’ve built with them. As advisors standardized their businesses, they reinforced that trust factor,” Onofrio (left) said. He noted though, that investors are demanding more information from advisors before they begin a relationship, as opposed to trusting the word of a friend or acquaintance who referred them to the advisor.

“A referral is one thing, but now they want to know more. Investors are looking for value and vetting advisors more,” Onofrio said.

The survey also asked advisors about how they use technology and social media in their firm. More than two-thirds use tablets and mobile devices to enhance client service.

Technology’s most important role is to help advisors be more productive though. Over 71% of respondents said technology helps them create efficiencies that lead to better productivity. Just 12% said technology’s most important role is to improve communication with clients.

Almost half of advisors said they used LinkedIn and over a quarter said they used Facebook. Although nearly twice as many advisors said they use Twitter over blogs, usage of both is still low, with just 13% of advisors saying they use Twitter. Furthermore, just 3% of respondents said social media has been useful in getting new clients. Referrals (85%) are by far the most useful strategy for gaining new business.

SEI asked advisors what one piece of advice they would give to new advisors and most suggested going into the business knowing what you want to get out of it. Over half of respondents said new advisors should “decide who you want to be and who your ideal clients are.” Pessimism was low; just 3% said they would tell young advisors to get out while they can or that “only the strong survive.”

“Advisors recognize there’s a lot of volatility in the economy and that will continue," Onofrio said. "The more they can systematize and define their processes, they more time they have to spend with clients, add new clients, and strengthen their business by adding services.”

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