The retail wealth management industry posted modest growth in 2011, according to the second annual PriceMetrix report released today. The average advisor production grew 1% during the year, reaching $537,000. Meanwhile, the average advisor's assets under management dropped 7% to $74 million, from $79 million in 2010.
"Despite the fact that revenues, and certainly assets, didn't improve as much as they did in 2010, the general health of the retail wealth management industry remains robust," said Doug Trott, president and CEO of PriceMetrix. "Our data shows that average assets are still higher than they were in 2009 and average revenue has increased from $453,000 in 2009 to $537,000 in 2011."
Additionally, PriceMetrix reported that advisors and their firms are shifting away from smaller and less productive households to larger and more productive ones. The average number of households per advisor dropped 8% in 2011, from 192 to 177, with the reduction coming primarily from small households, which the study defined as having less than $250,000 in investable assets.
Industry wide, the percentage of small households served by advisors has declined from 71% to 65%. From 2010 to 2011, average revenue per has increased 7%, rising from $2,954 to $3,174, indicating advisors are spending more time on bigger, more productive clients, according to PriceMetrix.
"With a reduced number of households, advisors have more capacity to better service their remaining households and accounts, and to focus on adding more of the households and accounts they desire," Trott said.
PriceMetrix' report is based on the company's aggregated retail brokerage data, which includes information on three million investors, 500 million transactions, one million fee-based accounts, four million transactional accounts and over $900 billion in investment assets.
PriceMetrix's report also determined that advisors and firms are increasingly transitioning to fee-based accounts. The number of fee-based accounts for the average advisor increased 10% in 2011 to 85 accounts. Since 2009, the average number of fee-based accounts per advisor has increased more than 35%. Fee-based assets, as a percentage of total assets, also rose 13% last year, while fee-based revenue, as a percentage of total revenue, rose 10%.
However, while fee-based revenue is rising, average return on assets has declined, from 1.23% in 2009 to 1.19% in 2011, according to PriceMetrix.