Call them optimistic. Financial advisors are expecting more robust growth in return on assets under management in 2013 that in 2012 even though many in Russell Investments’ latest quarterly survey failed to meet ROA growth expectations this year.
Forty-nine percent of advisors responding in Russell’s Financial Professional Outlook study reported that they had not experienced the kind of growth they had anticipated. Twenty-one percent said their ROA had grown more than expected and 28% said their ROA growth had fallen short of predictions.
On average, advisors had looked forward to 7.6% growth in ROA this year, but realized 7.2% growth.
In 2013, however, they said they expected 8.4% growth in ROA on average. Sixty-seven percent of respondents said the current ROA on their books of business was 80 basis points or less.
“Return on assets is one important metric for goal-setting around business growth,” Sam Ushio, practice management consultant for Russell’s U.S. advisor-sold business, said in a statement.
“Based on our research, we believe that a reasonable aspirational ROA level is around 70 to 90 basis points on the overall business. If an advisor is earning less, it may indicate that they are still using a transactional business model,” Ushio said. “At a deeper level, a lower ROA may reflect an advisor’s tendency to discount the value they deliver to clients, which often correlates with confusion on the competitive landscape.”
Ushio said 62% of respondents were focusing on deepening client relationships to help grow ROA across their businesses. Fifty-eight percent also reported that they were proactively seeking new clients to grow ROA, as well as asking for referrals (53%), moving clients into fee-based relationships (43%) and moving client cash off the “sidelines” (32%).