As baby boomers move into retirement, it is difficult for firms to keep up with their assets under management (AUM) and assets under administration (AUA). But top advisors have figured out how to make more money and separate themselves from the pack, according to an industry executive.

The Barron's top 100 wealth management practices have increased revenues 48% since 2021, even though assets are up only in the single digits, noted Steve Gresham, CEO of The Execution Project and managing principal of NextChapter.

Gresham, who spoke yesterday at the virtual Inside Retirement conference sponsored by Financial Advisor and The Money Show, said it has been a difficult year for AUA and AUM, but the best advisors are getting better because they are making more from the assets they have, he said.

“It’s the old saw. If you want to make more money, figure out another service, and that’s exactly what’s going on,” Gresham said.

Gresham said there's a number of services that firms could be adding, but there are three that are bringing success to top wealth managers. They are the following:

1. Team Expansion 
Firms, Gresham said, are adding to the team, which is a significant added value for the practice. He explained that a lot of the things that need to be done for a retiring household involve a lot of busy work that people don’t get around to, such as data entry, planning, signing up for things and applying for the necessary capabilities. “If you want to help a person who is rolling into retirement, you will do data entry for them, you will find ways to get all that stuff in order—Social Security, Medicare—a lot of these things are difficult because they take time,” he said. Gresham noted that a lot of teams have brought on younger, entry-level staffers to fulfill such duties. Adding younger people also satisfies the needs for succession planning, which every top advisor should be thinking about, he said.     

2. Adding Services Getting Clients To Use Them
Gresham said that while adding services is key, it’s also important to think about the depth and penetration of the services offered.. “Your practice may offer [a service], but how many of the clients are participating?” he asked. Gresham pointed out that 20 years ago, when he helped to build Merrill Lynch private wealth, some of the world’s top advisors said they delivered these wealth management capabilities. “But when you look at their books to see how many clients they actually delivered ... a lot of that list started to fall away,” he said. This, he said, creates big opportunities for competitors to grab the clients who are looking for the services that they are not receiving. So, firms need to pay close attention to the penetration rate of the services offer “because it’s just razor thin in a lot of practices.”  

3. Adding Retirement Income
This service is the most lucrative being added to practices, said Gresham, who acts as a senior educational advisor to the Alliance for Lifetime Income. But there seems to be a disconnect in how it’s communicated, he said. “There are advisors, when you say to them the client wants a retirement income program, the most common answer is ‘we have that, it’s the portfolio and [the client] can take a regular check from that and we will continue to grow the portfolio.’ And when asked about protecting risk, the No. 1 answer is ‘we’ll change the asset allocation,’ Gresham said, noting that these are not wrong answers “so much as they are not optimal from the perspective of the ears of the client."

Gresham said retirement income strategy must be spoken about very specifically at the clients’ level of understanding. It must speak to the efficiency of the product, he said.

The average client does not believe that they have a retirement income program, which makes them susceptible to someone who offers one, Gresham said. He added that a retirement income program does not mean that the portfolio is not important, “but it cannot as easily demonstrate to the client the concept of a retirement income paycheck,” he said.

Gresham said he advocates for annuity products because in some cases they make much more efficient use of the client’s assets, especially if the client is on course to live a long life. “People just live longer and unless there is a specific way to protect against the risk of that longevity, then there is a problem in the mind of the client about how they are going to be able to afford this,” Gresham said.

“Getting a check is a good thing. So, combine those income sources of Social Security, any kind of residual pension and then add to that some level of certainty,” Gresham said.

Gresham said more and more people in the industry are talking about adding protective income products to existing income solutions.  “I think we're going to see an awful lot more of the mainstreaming of those products because it's not a front-end loaded VA world anymore. That is horse and buggy time. We’ve got to move on,” he said.