In this challenging economy, while corporations downsize and outsource, the growth of professional services firms such as law offices, accounting firms, medical practices, consultants and engineering firms continues to be strong.
To attract and retain top talent, employers need to offer competitive compensation and benefits, so firms in the professional services industry offer more benefits than firms in other industries. While the professional services industry might present a real growth opportunity for financial advisors, it is not without its challenges.
High Growth Industry
According to the Bureau of Labor Statistics, Current Employment Statistic Highlights for April 2012, employment in the professional services industry has grown by 1.5 million since hitting a low in September 2009. Sixty-two thousand industry jobs were added in April 2012 alone.
The industry has also experienced double digit year-over-year revenue growth of 14.2 percent in 2011 from 3.6 percent in 2009 and 7.6 percent in 2010.
Geopolitical trends, clients' needs, capital flows and technology are the main drivers behind the rapid growth of the industry, creating the need for various professional business services. For example, the federal government's health information technology initiative is playing a large role in driving the need for healthcare technicians in this field. They are necessary to facilitate the transfer of patient records from paper to digital form. According to a 2011 Hot Careers for College Graduates career report from the University of California San Diego Extension, a career in health information technology ranked first among the top 10 careers listed.
As professional services firms grow, their commitment to attracting and retaining the best employees grows as well. This battle for talent creates a demand for top benefits.
So what does this mean for financial advisors?
According to a recent study by Nationwide Financial, the type, size, tenure and decision-making process of a firm have a direct impact on the benefits it seeks, the services it expects and its choice of financial advisor.
As a financial advisor, there is no better way to attract and retain clients than to tailor your approach to each client's specific needs. Among those professional services firms that turn to a financial advisor for benefits package advice, 99 percent are seeking guidance on their retirement plan, making these firms a real growth opportunity for financial advisors. Knowing more about who your clients are and what they value can help form and strengthen mutually beneficial relationships.
As you might expect, not every type of professional services firm looks at benefits the same way. For example, legal service firms (82 percent) consider it vital to conduct an annual or quarterly review with a professional intermediary and 79 percent want to feel comfortable that their fiduciary responsibilities are being met. Health services firms (97 percent) are focused on complying with regulations and 74 percent have a preference for 401(k) plans.
Advisors who take into account these differences by industry will be able to tailor their value propositions to better match the firm they are prospecting. For legal service firms, making certain to talk about review timing is important. For health services firms, highlighting educational materials related to regulatory compliance may be beneficial.
Not accounting for these differences may hinder an advisor's ability to grow their business in the long run.
Firm Size Matters
In small businesses (fewer than 50 employees), key decision makers are likely to be emotionally invested in the business. Relationships matter and decision makers at small businesses prefer an advisor who develops a personal relationship with them and their employees. They favor face-to-face contact with employees over other types of communications. For example, when ranking what was important in participant education, small professional service firms were twice as likely to choose in-person meetings as they were webinars.
In contrast, decision makers in midsize and large firms (with between 50 and 500 employees) are often formal boards. Many times, they are composed of senior executives who may be somewhat disconnected from the day-to-day activities and thoughts of employees. Large firms are more likely than small firms to turn to conferences (37 percent versus 20 percent) or to webinars (28 percent versus 14 percent) for participant education. Large firms are also more concerned with full fee disclosure and help with legal and regulatory compliance of their plans, while smaller firms list help with a plan design that takes care of them and their key employees as a top value they seek in a relationship with an advisor.
What does this mean for advisors? Advisors who take into account the differences between large and small firms will be able to build meaningful relationships with their clients and modify their offerings to fit the specific needs of each firm.