As is typical in the business world, the decision to expand an organization’s operations–offering a broader range of services–is often triggered more by the need to survive than by a desire to capture a bigger market share. The advisory business just might be at this crossroad, where concerns over continuity, and not just prosperity, are forcing more advisors to decide whether to jump on the wealth management bandwagon. In part I of this series, we examine the current attitude of advisors toward wealth management and how that attitude was developed. In part II, we will delve deeper into the hurdles facing advisors who aspire to become wealth managers, the financial and logistical make-up of successful wealth management shops, as well as the best business practices of such firms.
To Wealth Manage or Not To Wealth Manage
For many advisory firms, offering a narrow range of services–such as basic financial planning and investment selection– continues to lure new clients and retain existing ones. Nearly 63% of the 655 RIA firms that participate in AdvisorBenchmarking.com’s survey research offer two main services or fewer to their clients. This type of firm saw healthy profits of $241,000 in 2001, compared to $229,000 for the entire universe and a growth rate of 18.7% compared to 21% by the total universe, as shown in Charts 1 and 2 linked below.