FINANCIAL ADVISORY PRACTICES

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Industry Mayhem

  • Only 38 percent of advisors have a clear recovery strategy and communicate it with confidence. This means that nearly two-thirds of advisors are incapable of guiding their clients through this crisis. (source: Registered Rep)
  • "There's approximately 10% of the total financial advisors of the major firms that practice true wealth management or have a holistic, consultative practice. Which means 90% do everything else." - Rick Capozzi, Managing Director, Morgan Stanley Global Wealth Management Group
  • More than three-quarters of financial advisors say they have not lost clients, and in some cases have even gained clients. So how can it be that more than three-quarters of affluent clients say they plan to move money but three-quarters or more of advisors say they haven't lost clients? - "Who's Lying: Clients or Advisors", March 2009, FA Magazine
  • The term "wealth management" is grossly overused in the financial services industry today. The vast majority of financial advisors-77.9 percent, according to a Prince/Geracioti study call themselves wealth managers. Yet just 8.4 percent truly fit this description, according to data obtained in a study of 1,177 financial firms. The others act as investment generalists (79.1 percent) or product specialists (12.4 percent).
    Source: Wealth Management (Wealth Management Press, 2003); Prince & Associates, 2004. Analysis: CEG Worldwide, LLC.
  • "Wealth-management business CEO's rate only 17 percent of their current client relationship managers as having the skills to manage the needs of their clients." (Source: PricewaterhouseCoopers' 2007 Global Private Banking/Wealth Management Survey)

Unsettling Numbers

  • In 2008, 87 percent of advisors said they were "somewhat" to "very" satisfied with their career. In 2009, that figure dropped to 62 percent. (source: Registered Rep)
  • Spectrem Group Study:
    • The population of millionaires has taken its biggest percentage plunge since the firm started collecting data about 10 years ago. Households in the U.S. with a net worth of at least $1 million, excluding primary residences, has dropped to 6.7 million in 2008 from 9.2 million in 2007.
    • The number of households with investible assets of at least $1 million fell by 26% to 4.4 million from 5.98 million.
    • Households with a net worth of $5 million or more are also declining. Their numbers fell to 840,000 from 1.16 million
    • Almost half of all millionaire households lost more than 30% of their net worth, while a full 17% say they lost at least 40% of their money.
  • The total net worth of Americans was $51.5 trillion as of 12/31/08, down 18% in the last year, reaching its lowest level since 9/30/05 (source: Federal Reserve).

Aggravated Investors

  • 80.6% of investors plan to take away money from their advisor
    44.7% of investors will not recommend their advisor to other investors
    56.7% of investors plan on leaving their advisor
    - September 2008, Prince & Associates, Inc.
  • Only 2% of investors with more than $1 million in investable assets plan to recommend their firm to other investors -Tiburon report Current Events: Making Sense of The Impacts
  • 36% of millionaire households are unhappy with their advisor's performance, while only 14% say they plan to make more use of advisors in the future. (Source: Spectrem Group)
  • Why financial advisors lose their clients:
    1. Poor service
    2. Inadequate communication
    3. Advisors not being honest and upfront about their fees (Source: Spectrem Group)
  • Thane Stenner, founder of Stenner Investment Partners, says many wealthy investors are displeased and unsettled about their current advisory relationships, but they are unsure what to do about it.

Retirement

  • "The typical baby boomer is still 14 years away from retirement, which means that wealth accumulation is still a big issue for 77 million of them" - September 2008, ONWALLSTREET
  • Of the more than 10,000 Americans that were surveyed early last summer, only 27% were confident that they had or were saving sufficient money for their retirement.
    Another 23% were not sure (source: Retirement Made Simpler).
  • 31% of current American workers have done no planning or saved any money for their future retirement (source: Principal Financial)
  • 4 in 10 (40%) Mass Affluent investors do not have a financial plan. Of those without plans, 40% think they are important and nearly one-fourth would like to have a professionally prepared plan. (source: Spectrem Group)
  • Only 69.5% of advisors are helping their clients create and execute a financial plan and only 53% claim to provide financial organization. These are two of the eight criteria the affluent look for in a financial professional. (source: Registered Rep)
  • Survey of 1,305 independent financial advisors conducted by Curian Capital LLC, a Denver-based registered investment advisor, reports:
    • 90% of advisors feel that at least 20% of their clients don't have enough money set aside to retire at their expected income levels
    • 40% of advisors feel the biggest threat to their clients' retirement planning is a lack of time to build wealth
    • 69% of advisors say they haven't changed their clients' portfolios in the face of market volatility
    • Contradictory result: the survey shows 97% of advisors say retirement income planning is the most valuable asset they provide clients, and yet 55% would outsource that planning to a third-party asset manager.

Investor Demographics

  • To rank in the top 1% of all US taxpayers, an individual would have to earn $388,806 of adjusted gross income (source: IRS, Tax Foundation).
  • The top 1% of wage earners took home 22.1% of all national income in 2006, up from 8.5% in 1980. This same group paid 39.9% of all federal income tax in 2006, up from 19.1% in 1980 (source: IRS, Tax Foundation).