It was less than three years ago when advisors’ quarterly billing was climbing in line with exploding assets. Every time the market ticked up 10%, advisor revenues did the same. With the bulls raging, clients were so content with portfolio performance that very few called seeking broader financial planning advice. For the same reasons, you were so satisfied with the revenue stream that sometimes you did not charge clients for those sporadic financial planning sessions. And when new clients came in, the formula was even easier: You offered them financial planning services if they invested with you. And when they did, you waived fees, or recouped them as part of an all-encompassing asset management fee. Chart 1 below shows the average asset management fees for different account sizes at the end of 2001.

Chart 1: Average Assets Under Management Fees vs. Account Size
Source: Survey conducted from April to June 2002 with 163 respondents submitting completed surveys.

Well, that was then. Today, with revenues from existing clients declining along with assets, it’s more challenging for advisors to maintain a steady revenue stream. While our research shows that overall advisor revenues increased between 2000 and 2001 by 5.97%, further analysis reveals that revenues from existing clients dropped an estimated 27.65% for the same period. Overall revenue growth is clearly attributable to the influx of new clients (the average advisor increased clientele by 8.08% in 2001) seeking help in light of the market’s steep decline. Chart 2 below shows the change in total revenues, number of clients and revenues from existing clients between 2000 and 2001

Chart 2: Changes in Revenues and Clientele between 2000 and 2001