Close Close

Practice Management > Building Your Business

Russell Advisor Survey: Clients Risk Falling Short of Goals

Your article was successfully shared with the contacts you provided.

In the latest Financial Professional Outlook quarterly survey of 400 financial advisors , Russell Investments says it found that clients are at risk of falling short of their financial goals if corrective action is not taken.

Forty-four percent of advisors considered up to a quarter of their client base to be at “significant risk,” and 36% considered a quarter to a half of their client base to be at “significant risk.”

When asked why clients were vulnerable, about a quarter of advisors surveyed said clients are not willing to save enough (24%) or simply do not have enough money (22%). Other respondents cited “overall market risk” (20%) or “clients holding portfolios that are too conservative” for their retirement (17%).

“I see my overwhelming challenge to be convincing clients about the need to either work longer or save money,” said Suzanne Uhl-Melanson of Commonwealth Financial Network in a press release.

According to Michael Wells at Moors & Cabot, Inc., “It comes down to one word: discipline.”

Phill Rogerson, managing director, consulting services for Russell’s Private Client Services business, added: “In today’s environment, it is important to focus on what you can control as an investor – such as your savings rate – and be cautiously prudent with the things you can’t control, such as the markets.”

The results of the survey also indicate a greater level of advisor certainty about equity markets over the next 12 months.

In addition, the survey shows an uptick in planned allocations to value-oriented U.S. equity asset classes (up 7%) as well as to real estate (8%). On the flip side, 39% and 43% of advisors plan to decrease their allocation to corporate and high yield bonds respectively, an increase of 9 points since March 2010 in both instances.

“An increasing allocation to U.S. value equity at this time could be perceived as a flight to quality amid recent global volatility because, despite the havoc the economic events of the past couple of years have wreaked on the U.S. economy and its future prospects, the United States remains the dominant economy today,” Rogerson said.

Most advisors indicated they will respond to regulatory changes by “seeking advice from compliance officers/hierarchy” (62%), “reassessing their clients’ situations, risk tolerances and goals” (48%), and “explaining changes to clients” (40%).

“I expect the cost of compliance to go up significantly,” said Jason Anderson at Wilbanks Securities, Inc., in a statement.

Looking ahead to year-end revenue goals, advisors considered a lack of qualified leads and referrals (23%) a key impediment to reaching revenue goals, followed by the fact that clients remain on the sidelines (cash) due to market concerns (22%). Advisors also cited increased regulatory oversight and compliance requirements as a significant obstacle (19%).

In a recent article entitled “Assessing the Health of Your Business,” Kevin Bishopp, Russell’s practice management consultant, outlines a framework to help advisors evaluate their business’ health and strategies to address potential revenue shortfalls. Plus, he offers recommendations for fundamental changes that can help attract new clients and better position a business for the long-term.