During 2010, the registered investment advisory (RIA) industry felt the impact of the bear market—in fact, some firms have still not bounced back from the financial crisis. The RIA landscape was dramatically reshaped by clients’ demands for more of their advisors’ time and for reassurance from their advisors. The good news is that advisors, investors and consumers expressed a boost in confidence in November, with major indexes all reporting higher levels, reflecting the increased confidence. Investment advisors were more optimistic not just in November, but for the last three months. And the Advisor Confidence Index, which measures advisor sentiment in the economy and the stock market, has been improving since August 2010.
To-do List: Focus on Communication and Service
Difficult times can be opportunities for well-grounded advisory firms to grow. Many financial professionals are doing all the right things, including staying close to their clients, as well as increasing their focus on communicating with clients—a trend we have recorded throughout 2010 and one that we have long advocated. The ability to maintain a firm’s strategic objectives while quelling client concerns has never been more important.
As proactive communications are crucial, especially during difficult times, spending time with clients is also critical. In the latest AdvisorBenchmaking report, advisors ranked client acquisition and marketing as the area which they feel they most need to improve (according to 47% of survey participants in 2009 and 74% in 2008). They also named finding new clients (79%) and communication with clients (55%) as the most challenging areas of their business. Yet for firms that excel at relationship management and client communications, it appears that finding new clients is a natural outgrowth of that strength. In fact, profitability can be directly tied to time spent with clients. Firms that spend more than 60% of their time with clients have nearly four times the profits of the next-most-profitable firms (see chart at top).
To-do List: Have a Marketing Strategy
Half of advisors surveyed think that increasing marketing and networking will lead to more success. It’s interesting to note that while 47% of advisors said that client acquisition and marketing is the area that needs the most improvement, 61% percent of advisors don’t have a marketing plan in place.