Insights From the 2012 Top Wealth Managers Survey, Pt. 3: Siren Call of the HNW Client

Retention fuels growth through existing client referrals. In fact, we can look at the first four items on the chart on the left as a continuous cycle—retention creates referrals from existing clients, which brings revenue growth to the firm; in turn, an increase in revenue then brings an increase in profitability.

Unfortunately, this cycle can be very slow and interrupted by market movements or other events. Referrals from clients alone are not enough for meeting most growth goals and revenue alone is not enough to grow profitability.

Viewing the priorities of the wealth managers in this year’s survey by firm size indicates that all firms regardless of size still place serving and retaining clients as their top priorities, followed by finding good new clients, growing revenues and growing profits.

Productivity issues may be the reason why, when participants were asked in the survey what help they would want to receive from custodians, their top two responses were technology and practice management. This is where some of the needs diverge between the largest and smallest firms. The largest firms had significant interest in product, alternative investments and education on new investment vehicles, while smaller firms assigned the least importance to alternative investments and other product information.

Of the participants in the study, the table on the prior page shows that 47% use Charles Schwab as their primary custodian, 20% use Fidelity, 11% use TD Ameritrade, 7% use Pershing and the remaining 15% are split among multiple firms. Most firms, however, use multiple custodians with, on average, 77% of their assets being held with the primary custodian.

Primary custodian market shares remain consistent across all segments, with the exception of Pershing and TDA. These two custodians traded their spots on the list with the largest participants using Pershing as their primary custodian (13%) versus TDA (4%).

What’s Next for Wealth Management?

The 2012 Top Wealth Manager survey shows an industry in a period of prosperity, high AUM and attracting very high-end clients. The industry is also changing: the size of the average firm has grown, and the bar to be one of the top firms is higher than ever before. What is more, the nature of wealth management firms is changing. Many are owned by large public companies or national brands, and many are much larger firms than the respective local offices of their traditional competitors, wirehouse firms and trust companies. You can see advertisements from several firms on national TV, radio or in magazines.

The word independent, too, is becoming harder to define and use. Yet, the more things change, the more they stay the same. Success comes to those firms which can create a long-term, sustainable growth strategy and patiently build on their strong client relationships. The challenges remain the same—finding the optimal balance between the size of the client relationship and the cost of service while creating a productive service model that relies on teams and the most experienced professionals.

The Top Wealth Managers in the AdvisorOne survey provide an example for the entire industry to follow—a path to growth and success in business and client service.

Please visit the 2012 Top Wealth Managers home page for additional data and analysis.

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