The past one-and-a-half years have left a lot of financial advisors and their clients bruised and battered. While scars still linger, the majority of advisors remain optimistic about their growth prospects.
According to a newly released study by Charles Schwab, 65% of firms say they're satisfied or very satisfied with growth over the past three years. In addition, 84% of firms plan to grow either aggressively (35%) or moderately (49%) during the next five years.
"For the past year or so, a lot of financial advisors have been huddled and focused on existing clients," says Trish Cox, senior vice president and chief operating officer at Advisor Services at Charles Schwab. "But there are rays of hope and they're re-engaging again."
Schwab's 2009 RIA Benchmarking Study of 610 advisory firms that custody their assets at Schwab looks at performance numbers in 2008 and some of the best practices that can help advisors grow in 2009 and beyond.
Sometimes the notion of best practices can be as simple as making time for long-range planning. Sounds easy, but finding time for strategic thinking has been difficult because advisors recently have been spending so much time focused on high-touch service for existing clients that there's not enough time to think about tomorrow.
The intense workloads experienced by advisors in recent months, coupled with the lousy markets that hammered many portfolios, caused the percentage of dissatisfied advisory firms to jump to 35% in March 2009, up from 24% in June 2007. Perhaps some of that frustration is a result of being reactive, rather than having been proactive regarding the recent crisis.
"Those with more long-range plans around how to manage through those hard times seem to be a bit more satisfied than those who were taken a bit unaware and had to retrench and focus on client retention," Cox says. "And those firms who had long-range plans in place had disciplined management in good times that prepared them for a retrenchment."
One advisor told Cox that it's more important to be disciplined in boom years and not kid yourself that you're creating extra revenue during times when the environment is actually creating that growth.
"In this advisor's case, it was about being smart by keeping some retained earnings for a rainy day," she says. "Those who built that into their plans-knowing that markets are cyclical-aren't caught flat-footed and needing to lay off staff."
Now that the hubbub has subsided from the darkest days of the market downturn, advisors can let go of the hands of their existing clients and start reaching out to the hands of prospective clients. But those folks aren't as quick to make the handshake that seals the deal on a new client-advisor relationship.
"Conversations with prospects and referrals are taking longer," Cox says. "What might've taken one conversation is now taking as much as four or five meetings to close the deal."