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Practice Management > Building Your Business

To Succeed, Get Your Service Mix Right, Advisor

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In building an investment advisory business, providing the right mix of services, and focusing on how they are delivered, is critical for practice success. While the service model offered to clients has remained fairly stable over the past several years, the latest AdvisorBenchmarking survey indicates advisors may be spending more of their time helping clients deal with challenging markets. This may explain why a significant level of RIAs either hold or are planning to hold some professional license or designation.

The largest shifts in how advisors spend their time have persisted for several years, according to the latest AdvisorBenchmarking study. This suggests that the industry may have settled into a “new normal” with a strong emphasis on relationship basics, including spending more time on client communication and client relationship management. The single biggest change in the latest survey was a shift toward more time spent on portfolio management. Challenging markets appear to be taking up more of advisors’ attention as they develop investment strategies focused on meeting clients’ objectives, in spite of volatile market conditions.

The areas that appear to be suffering from a lack of focus are those that require the advisor to work “on” the business: e.g., business strategy and business administration. The one increase in this area was time spent on marketing, which is important given advisors’ constant focus on asset growth. What was surprising in the latest data was the decline in time spent on compliance–despite the fact that many advisors see their compliance burden as a threat to the business. The decrease in time spent on compliance, however, corresponds to a sharp increase in outsourcing in this area, suggesting that advisors have found an effective way to manage their compliance challenges while freeing up their time for other important activities. 

The service offering of most RIA firms has not changed significantly in the last couple of years. The four cornerstones of advisory firms appear to be relatively stable and include: basic investment advice; retirement planning; investment management and financial planning. The second tier of services includes insurance, estate and charitable giving planning–although anywhere from 14% to 21% of advisors refer the business out, which one could speculate is part of a center of influence (COI) referral marketing strategy.

Advisors often use COI marketing to establish mutual referral relationships, and close working relationships, with specialists in other professions–with whom they can also confer and work on clients’ financial issues. To help improve bottom-line performance, many investment advisors are looking to boost productivity by outsourcing solutions that create capacity for their teams or meet specific business needs. The interest in–and increased usage of–outsourcing suggests that advisory firms are looking to drive growth in more scalable ways. Each of the top outsourced functions has seen tremendous growth: tax filings (up to 54%), bookkeeping (up to 26%), human resource functions (up three-fold to 26%) and compliance (up threefold to 22%).  

The service model offered by advisors appears to be relatively static and will remain so for the foreseeable future: Across a wide range of services, the “plan to offer” category did not break out of the single digits for any type of service. The services we are likely to see RIAs offer in the future are investment services to other advisors and charitable giving planning, each of which 6% of advisors plan to offer. With regard to the former, just over a fifth (21%) of advisors are offering investment management services to other advisors, a number that has remained steady since last year. But as a continuing influx of products makes portfolio construction more complex and time consuming, portfolio construction may be decreasingly productive–and even unrealistic–for the advisor to efficiently manage alone. Specializing in investment management to other advisors could provide a competitive advantage. Firms that delegate at least some investment management to subadvisors may be able to improve their overall business profile.

As with professional services, advisors’ attitudes toward professional designations appear relatively static, with the lone exception being the CFP designation. The “working toward” response for the CFP designation was three to seven times higher than for other designations, which were only in the single digits–the highest being CFA at 5%. Yet the percentage of those “working toward” their CFP was considerably higher at 14%. This result is not surprising given the emphasis on planning in the RIA service model. From this data, one could argue that the “planning” services being offered by advisors is indeed getting more robust as more advisors take a regimented approach, governed and designed by an independent standard-setting body.

Many advisors find that the effort to provide the right services is often rewarded, allowing them to match their resources with the needs of their particular client base. We believe those advisors who offer the appropriate mix of services and outsource efficiently may be in the best position to strengthen relationships, improve asset flows and ensure that they are spending their valuable time in the best possible way.

AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. Study results quoted in this article are based on the 300-plus RIA firms that took the online survey in March-May 2011. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business.

AdvisorBenchmarking is an affiliate of Guggenheim Investments. The analysis on is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general in nature, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Guggenheim Investments or any of its affiliates.


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