In a survey of some 1,100 financial advisors, CEG Insights found that 13.8% earn more than $1 million a year. Half earn less than $500,000 annually, while 37% bring in between $500,000 and $1 million a year.
The survey showed that 46.9% of the $1 million-plus advisors manage more than $1 billion in assets, compared with less than 10% of lower-earning advisors. CEG noted, however, that nearly a quarter of the highest earners manage between $101 million and $500 million in assets — proof, it said, that asset levels alone do not determine success.
Another twist: The highest earning advisors tend to serve the most number of client households, but about 15% of them earn more than $1 million by serving just 51 to 150 client households.
CEG's managing principal of wealth management research, Catherine McBreen, and elite advisor strategist Paul Lofties discussed the research on an episode of CEG's Preeminent Financial Advisor podcast.
They talked through several action steps that advisors who want to generate higher incomes can consider implementing in their practices.
1. Manage more of your clients' wealth.
Sixty-two percent of $1 million-plus advisors surveyed reported that they manage between 76% and 100% of their clients' total investable assets, whereas those who earn less than $500,000 tend to manage only 25% to 50% of client assets.
One way to get a client to move more assets? Just ask them.
CEG's research shows that "most investors, especially those with less than $25 million, are more than likely to only have one financial advisor, and that advisor just has to ask for it," McBreen said. "They might have a Schwab account over here that they've never thought of moving over to their advisor."
2. Engage in 're-discovery.'
One way to attract more of existing clients' assets is to have a deep and detailed conversation with them every few years about what has changed in their lives. These discussions often help advisors identify new or additional assets, say, from an inheritance or windfall, that they can ask to manage.
"We just did a focus group with wealthy investors for a client," McBreen said, "and one of the people in the focus group mentioned that 'I'm with my advisor all the time. He knew that I had just sold my house, and he never asked me what I did with the assets that came from that house.' And he says, 'I would've been willing to turn them over to him to manage it, but he never asked.'"
3. Position yourself as the client's lead advisor.
Some clients have multiple advisors, especially as they become more affluent. An advisor can act as the leader of that group by reporting on the big-picture, comprehensive status of the client's wealth. Advisors who are able to report to clients how their entire financial situation — including accounts managed by other advisors — is looking in relation to their goals position themselves to win more of those outside assets over time.
4. Use account aggregation technology.
Aggregation tools enable advisors to see clients' entire financial picture, including assets held at other institutions they may gain access to, and give clients a full view of their financial lives.
5. Target high-net-worth clients.
Wealthier clients tend to mean more income for advisors who serve them. Among the $1 million-plus advisors, more than three-quarters of their clients on average have at least $5 million in net worth; of these, 27% have more than $25 million in investable assets. For advisors making less than $500,000 annually, only 35% of clients have a net worth of $5 million.
6. To find wealthier clients, leverage strategic partnerships.
Building strong relationships with centers of influence such as accountants and attorneys can lead to more wealthy clients. These professionals can be an excellent referral source, particularly at times when their clients may need help with wealth management.
7. Position your practice to be a virtual family office.
The VFO business model is designed to emulate the traditional single-family office model that serves extremely wealthy families; it is very attractive to the high-net-worth marketplace — especially to millennials (there are more millennial high-net-worth households than you would believe," McBreen said).
This model incorporates a wide array of financial and nonfinancial services and solutions like estate and insurance planning, delivered by best-in-class professionals.
8. Offer workshops tailored to address affluent clients' key concerns.
While mass-market workshops seldom lead to new business, workshops and presentations designed to speak to the big concerns facing wealthy investors and families can be a strong way to build new business. Those concerns include how to leave a legacy for children and tax-mitigation strategies. A smart approach: Conduct workshops in partnership with accountants and attorneys with whom you have strong relationships.
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