number of registered independent advisors will grow dramatically in the
next five years and competition in the industry will substantially
increase, requiring new approaches to create a successful practice,
according to a report conducted for Pershing Advisor Solutions LLC, a
financial solutions provider for independent, fee-based RIAs.
The number of retail-focused advisory firms is forecast to jump nearly 23% over the next five years, to more than 19,000. The average advisory firm will exceed an estimated $1 billion in assets under management by 2012, representing a new annual revenue opportunity of $35 billion for advisors. The report, "Uncharted Waters: Navigating the Forces Shaping the Advisory Industry," was prepared by Moss Adams LLP, a business consultant and investment banking service for middle-market companies in the western U.S.
"To capitalize on their current competitive advantage, registered investment advisors will need to develop niche segmentation strategies," says Mark Tibergien, principal at Moss Adams. "That means more than just a marketing strategy. It means adopting a way of doing business that includes an understanding of the niche market, whether that is business owners, evangelical Christians, gays and lesbians, or some other group. That includes an understanding of what drives the group and what is important to them.
"A lot of firms have grown at an extraordinary rate by passive referrals with little conscious effort," he continues. "With many firms now competing, advisors are going to have to bulk up their marketing muscle and add a fair amount of technical capacity to service clients better."
Tibergien notes that clients are becoming wiser and realize they have the power in the advisor/client relationship, so advisors need to sharpen their game to keep clients. "This is all part of the natural maturation of the financial services industry," he says.