ยท Many big investment firms ranging from PaineWebber to Sanford C. Bernstein & Co. are offering accountants fees of 10 to 25 basis points (sometimes in perpetuity) to refer business to them.
With everyone targeting the affluent or semi-affluent, French-owned AXA entered the financial advisory business with services aimed at the emerging affluent. American Express Financial Advisors is seeking to capitalize on the industry's hottest trend, lifestyle planning, by marshalling the resources of its parent company in areas like travel services and by offering special inducements for advisors' clients.
The stampede of financial services giants into the advisory business virtually guarantees a high failure rate. But it's unlikely to stop soon. Even if Dalbar's prediction of 185,000 advisors by 2012 comes up short, the supply of financial advisors is likely to start catching up with the demand for their services. ''I think most of the big companies will fail and end up trying to buy small firms,'' Hurley says. ''This is a business that is pure execution. Morgan has been surprised at how difficult this business is. But give them time and billions, and they'll figure it out.''
Even if they don't, the big firms have the wherewithal to make business life miserable for independent advisors. That's why Hurley thinks some financial advisors who receive attractive offers to sell their firms should take them seriously. At the symposium, he alluded to the experience of HMO operators and physicians. ''The HMO business may be in chaos today, but the folks who started the first HMOs and sold them are billionaires today,'' he told attendees. ''Advisors make the same comments today that family-practice doctors made 15 years ago. Family-practice doctors are still in business today, but they are making $60,000 a year.''
Not all of Hurley's analogies are likely to hold, and family-practice physicians probably are doing a little better than his figures. Moreover, independent financial advisors wouldn't have captured as much market share in the '90s from much better capitalized companies if they weren't doing something right. In recent years, client turnover at the average independent firm has averaged between 3% and 5%, compared to 15% to 20% at larger firms. Indeed, many advisors rarely lost any clients unless they died or moved, until 1998, when the tech-stock explosion prompted some clients to question advisors' investment acumen. Hurley himself believes that there always will be hundreds, if not thousands, of very successful, profitable firms in the future.
For all their past David vs. Goliath success, advisors have sound reasons to be troubled about the future. ''The biggest threat to your firms isn't losing clients. It's losing key personnel,'' Hurley warned.
Marketing is perhaps the biggest challenge financial giants pose to independent advisors. ''My marketing plan is to look at my phone and wait for it to ring,'' joked one successful independent advisor. Many independent firms are considering hiring dedicated marketers (once seen as almost sacrilegious) for the first time.
Even several younger tech-savvy advisors at the Dallas symposium rolled their eyeballs after listening to technology executives from Charles Schwab & Co. to TD Waterhouse discuss the implications of new wireless technologies and 24-hour, 7-day-a-week services.
Judy Shine of Shine Investment Advisor Services in Englewood, Colo., asked, ''What I'm hearing is that if I'm not available to answer clients' questions at 3 a.m. on some wireless service, I'll lose them, and my response is: 'Good.' ''
Chris Cordaro of Bugen Stuart Korn & Cordaro in Chatham, N.J., commented, ''Technology is a paradox. You hear that clients will demand access, but they also need a technical person from American Express to hook up their access. Most clients are not that tech-savvy; they use the Internet but have a lot of trouble downloading certain types of information.''