Providing A Road Map
In addition to tools, advisors are looking toward their custodians and broker-dealers for business know-how. At TD Ameritrade, for example, consultants have provided 2,000 fee-based advisors with business "road maps" over the past year. The top two things advisors were looking for in those consultations were how to grow their businesses and how to make them more efficient, says Tom Bradley, president of TD Ameritrade's institutional division.
When times were good, advisors weren't necessarily open to such advice, let alone going out to look for it, Bradley notes. But declining revenues and profit margins have caused many advisors to reconsider their business practices, he says.
"They're much more open now to advice on how to run efficient back offices," Bradley says. For example, he says, advisors are much more interested in the efficiencies to be gained through systematic portfolio rebalancing.
Lynch of Capital Analyst says advisors also want to have efficient back office operations so they can be nimble, with the ability to add services and better serve clients. "I think generally what they are looking to do is have the ability to be able to respond to a changing set of expectations among the affluent client base," he says.
Advisors are also looking for help because the low-growth environment essentially means RIAs can't ride a market wave to business success. They, like most everyone else, have to invest some sweat equity into what they do, Lynch says.
"I think clients are paying more attention to what they are getting and what they are paying," he says. "When the market is humming along it doesn't take much to get great returns. Only when it becomes more elusive to create those types of returns does the value of advice become clearer."
That could include providing consulting in areas including investment management, estate planning and, more recently, lifestyle planning, he says. It's also led to advisors, like their clients, being more discriminating about fees and transparency in reporting. That's one of the reasons Capital Analyst charges advisors an annual flat fee for its services-starting at $120,000 for firms with up to three advisors and $150 million or more in assets under management. For that fee, the broker-dealer includes an array of practice management consulting services, including advice on succession planning.
"The reason the fee business started to grow is clients like it-they can really understand a fee," Lynch says. "What we've done is created the same model with the advisors."