Fidelity Investments unveiled Thursday the results of its 6th annual Broker and Advisor Sentiment Index, which found that overall sentiment is at its highest since the financial crisis—7.6 out of a high of 10—with advisors and brokers taking action to generate new business, placing greater importance on compensation, developing professionally and receiving marketing support.
The online survey, conducted from March 15-29, polled 1,207 advisors from large and small independent broker-dealers, banks, wirehouses, insurance companies and registered investment advisor (RIA) firms. The advisors work primarily with individual investors and manage a minimum of $10 million in assets.
The study—which looked at U.S. brokers’ and advisors’ satisfaction with their profession and their firms’ offerings as well as their own approach to various financial advisory activities–found that Gen X/Y advisors, female advisors, advisors working in teams and those who earned more compensation from fees than from commissions (“fee-based”) typically had higher assets under management (AUM) compared with their peers, making these segments likely to drive the future of the advice business.
Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company, said in a statement that “Four years after the financial crisis, brokers and advisors are back in ‘growth mode’—focused on developing themselves professionally and expanding their practices.” By recognizing these shifts in sentiment, he said, “as well as key segments poised for growth, firm leaders can help to ensure they are meeting the needs of today’s brokers and advisors, while also positioning their firms for future success.”
Key highlights from the study include:
• Gen X/Y takes on industry leadership. Today’s advisor is, on average, 46 years old, with Gen X/Y now representing more than half of the industry.
The survey also found that GenX/Y and Boomers agreed that annuities and equity ETFs were the most likely to play a more significant role in their investment strategies this year. Gen X/Y advisors said they were more likely to add alternative investments, while Boomers said they were more likely to add international mutual funds.
• Female advisors are successful but still a minority. While women are currently significantly underrepresented in the advisory space overall, more women have been entering the field. Female advisors who have fewer than five years of experience have increased by 40% since 2010.
The study notes that with women projected to account for 51.2% of the increase in total labor force growth between 2008 and 2018, the advisory industry “will likely see more join the ranks of advisors, especially with a concerted outreach by firms and the industry at large.”
Men and women agreed that annuities and equity ETFs would play the biggest role in their product choices this year.
• “Soloists” dominate, but team players are far more profitable. Most advisors worked alone versus as part of a team, but “teaming” may increase as firms recognize their relative success in terms of compensation and assets under management (AUM).
Teamed advisors made 32% more in compensation than those who went solo.
• Continued migration toward fee-based compensation. The majority (52%) of advisors’ current compensation comes from commissions, but the study found that advisors would like to see their compensation structure shift toward more fee-based business—a trend since 2007.
A large number of advisors (33%) made most of their money from fees. Since 2007, the study found, advisors have expressed a desire to have fee-based accounts represent the largest component of their books.