Fee-Only Practices Are The Most Profitable

Fee-only financial advisors are running the most profitable practices, with the most affluent clients, compared to their counterparts in other markets, according to a new study.
The study also concluded that a small minority of advisors are managing the most assets and reaping the most profits.
The study by Tiburon Strategic Advisors found that fee-only advisors are attracting the wealthiest clients, generating the most revenues and profits and advising on the most assets, compared to independent reps, wirehouses and broker-dealers, CPAs and other tax professionals.
The study was based on data from 700 financial advisors across a variety of markets, according to Tiburon.
"This sector of the industry began its recovery from the sagging market earlier than most, as successful fee-only financial advisors were able to transition their practices to the role of coaching and holding clients hands through the tough times," the study's authors state. "This is a luxury many brokers cannot enjoy, as their practices are based on sales."
The study found that, on average, fee-only advisors are most profitable despite the fact that they service the fewest clients and rack up the highest expenses. The study also said that, like brokers and independent reps, fee-only advisors are competing in a market where a small number of players control most of the assets. About 75% of advisors manage less than $50 million in assets, while 1% manages more than $500 million.
More than half of all fee-only advisors report revenue levels of less than $250,000 per year, which is also similar to the broker and independent rep market. A small number of fee-only advisors, however, are bringing in the most money. The study says that 14% of fee-only advisors generate more than $500,000 in annual revenues, and 5% produce more than $1 million.
Fee-only advisors have generally recovered from the bear market, the study concluded. Although advisors saw their revenues decrease during the bear market, revenues eventually rebounded in 2003 to levels that exceeded those in 1999.

FOLIOfn Subsidiary Launches Proxy Compliance Service
PROXY Governance Inc. (www.proxygovernance.com), an independent proxy advisory and voting firm, recently announced that its new automated proxy-voting platform is available for use by advisors. PROXY Governance is a wholly-owned subsidiary of FOLIOfn Inc., a financial services company that provides brokerage services and portfolio management technology for individual investors and investment advisors.
The firm's voting platform provides an advanced, turnkey proxy voting solution, capable of helping advisors comply with all relevant SEC and U.S. Department of Labor regulations, as well as any client-specific proxy voting requirements. "Unlike other solutions currently available, our Web-based technology seamlessly integrates all voting functions, including research and vote recommendation review, establishment of policy guidelines and execution of voting decisions to proxy distributors, ballot processing, record keeping and reporting," says Greg Vigrass, executive vice president and head of institutional sales at PROXY Governance, and its parent company, FOLIOfn Inc.
Financial Advisor magazine will offer full coverage of PROXY Governance Inc. as well as proxy compliance regulations next month. For further information about PROXY Governance Inc., please visit (www.proxygovernance.com) or e-mail [email protected].

Advisors Got Wealthier, And Happier, In 2004, Says Survey
Advisors are growing assets and profit margins and are optimistic about the future, but are being weighed down somewhat by compliance issues, a new survey says.
"This is a very exciting time for advisors, who are seeing tangible results from their ongoing commitment to operational and investment excellence," says Maya Ivanova, research analyst for Rydex AdvisorBenchmarking, which carried out the survey.
The survey found that assets under management climbed to a six-year high, growing 21% from 2003 to 2004, which ended with a median of $105 million under management. A majority of the 353 RIAs surveyed, 81%, said their businesses were performing better in 2004 than they had in 2003.
They cited "government over-regulation" as the biggest threat their businesses faced. Advisors said they spent 19% of their time on clients in 2004, which was down from 36% in 2003, with many attributing the decrease to increased compliance responsibilities.
Other findings included:
Revenues increased 18% in 2004, to a median of $1.08 million.
The growth of overhead expenses slowed down, increasing 11% in 2004 compared to 21% in 2003.
The percentage of advisors using ETFs rose to 40% in 2004, compared to 30.7% in 2003. Separately managed accounts also increased in popularity, with 60% of advisors using them in 2004, compared to 50.2% a year earlier.
Active management became more prevalent, with 15.6% of advisors describing themselves as becoming more tactical, compared to 7.6% a year earlier.

FPA Names Nicolette 2006 President-Elect
Nicholas A. Nicolette, principal of Sterling Financial Planning in Sparta, N.J., has been named 2006 president-elect for the Financial Planning Association (FPA). The board also named four new members to its board of directors.
Nicolette, who has been on the FPA's board of directors for two years, will serve as the organization's president in 2007. He has been a member of FPA and its predecessor organizations since 1982 and has served as president and chair of the FPA of New Jersey, and president, chair and education director of the Northern New Jersey Society of the Institute of Certified Financial Planners (ICFP), one of the predecessor organizations of the FPA.
"I'm extremely honored to have been elected to this position," Nicolette says. "This is an exciting time as FPA continues its work of serving the financial planning profession and helping the public to thrive and prosper in their lives."
The new board members, who will serve three-year terms starting January 1, are:
Susan K. Bradley, founder of the Sudden Money Institute in Palm Beach Gardens, Fla., and an outside partner with The Palm Beach Wealth Management Group at Raymond James & Associates in West Palm Beach, Fla.
Tom L. Potts, professor of finance and director of the financial services program for Baylor University in Waco, Texas. He served as president of the Academy of Financial Services in 1988, the chair of the CFP Board of Governors in 1993 and chair of the International CFP Council in 1994.
Richard C. Salmen, senior vice president/senior advisor with GTrust in Overland Park, Kan. He formerly held positions with Waddell & Reed, Financial Planning Concepts and Legacy Trust Company.
Stacy L. Schaus, principal and leader of Hewitt Financial Services LLC, a fully owned subsidiary of Hewitt Associates in Lincolnshire, Ill. She consults with many of the nation's largest employers on the design and delivery of retirement plans as well as financial advocacy programs for their employees.

Changes Allow Katrina Victims To Access Plan Funds
The Internal Revenue Service has announced that recent tax law changes give victims of Hurricane Katrina new opportunities to draw funds from qualified retirement plans.
Under the new provisions, Katrina victims can make tax-favored withdrawals, recontributions and loans on eligible retirement plans such as annuities and IRAs, according to the IRS.
Distributions must be made on or after August 25, 2006, and before January 1, 2007, and are available to people whose principal residence was in the Katrina disaster area on August 28, 2005, and who sustained an economic loss as a result of the storm.
Those who are eligible can make tax-favored distributions of up to $100,000 on their retirement accounts, according to the IRS.
The distributions count as income, but are not subject to the 10% additional tax on early distributions. If the distribution is recontributed within three years it is treated as a rollover-meaning individuals can file an amended tax return to claim a tax refund, the IRS says.