First, the bad news. Fifty percent of financial advisors do not have a written business plan, 46% do not have their own retirement plan for themselves (despite 40% saying they plan to retire within the next 14 years), only 25% have a succession plan in place, and only 25% have a formal definition of their ideal client. When asked “What do you plan to do with your business/clients when you retire?” 17% answered “I don’t know.”
Now, the good news. Of those advisors under 40, 61% say they have a written business plan. The larger the firm, the more likely it is to have one. There is also a clear “professionalization” trend within the advisor industry, with more non-advisor managers in place to run the business, and advisors are doing a good job of meeting their clients’ needs.
The news arises from the Financial Planning Association’s inaugural study, “The Future of Practice Management,” sponsored by the FPA’s new Research and Practice Institute, and executed by Advisor Impact, the research firm run by Julie Littlechild, who provided some of the color in the comments above.
Advisor Impact is partnering with the FPA Institute on this study and a series of additional reports throughout 2014.
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The Future study was based on an October online survey of 2,376 respondents who spent an average of 27 minutes to complete the survey. Of those respondents, 1,954 were advisors, drawn, Littlechild said, from all advisor channels — RIAs (23% of all respondents), wirehouse brokers (15%), independent and regional broker-dealers (29%), 13% insurance BD reps and 10% dually registered advisors. By design, 422 of the total respondents included junior advisors (those under 40), support staff and non-advisor management. Only about 30% of the respondents were FPA members, but 39% were CFPs.
Valerie Porter, the FPA’s Director of Practitioner Services and herself a CFP with her own practice near Indianapolis, said the inaugural study was meant to “identify some of the key areas where advisors need guidance,” and explained that the quarterly studies that will be issued throughout 2014 “will focus on some of those issues, and then tailor resources at FPA to meet those needs.”
In addition to helping FPA’s members — for example, “if we find that many advisors don’t have a business plan, FPA can make templates available” to members and hold sessions on how to write a business plan — it will also benefit consumers.
One of the major issues identified in the study was advisors’ struggle with time management, which Porter said she understood well. “There are lots of demand on our time,” she said, and the work that advisors do on behalf of clients “can be very taxing” since “money is a very emotional subject.”