Successful Advisors Do These Ten Things

With the advisor market changing quickly – think retirements, new regulation, more fee-based products changing fee models – some advisors are performing very well.

Other advisors, not so much. So what do the top advisors do that the advisory masses don’t?

To find out, the Advisor Authority hired Harris Poll and surveyed 972 RIAs and fee-based advisors in January and February.

The 10 traits were compiled in a report titled Advisor Authority 2018.

Top advisors were more likely to diverge from the rest of their peers in some areas, while in other areas both groups exhibited similarities, the report found.

“The most successful advisors – those who earn more or manage more AUM than their peers – are already a step ahead,’ wrote Craig Hawley, head of Nationwide Advisory Solutions, in an introduction to the report.

“To keep pace, all advisors must adapt – or be left behind,” he wrote.

Of the 972 advisors questioned, 45 percent were millennials between 18 and 37 years old, 32 percent were Gen Xers between 38 and 53 years old, 22 percent were baby boomers between 54 and 72 years old and only 1 percent were 73 years or older.

Here’s how those top advisors remain ahead of regular advisor folk:

Technology

Top advisors innovate when it comes to technology and use technology to improve the efficiency of their practices.

They also use technology to simplify and speed up processes and attract younger clients doing so, the research found.

“Growth, profitability and technology are completely interrelated,“ said Alexander J. Gross, managing director and senior client advisor with Daintree Advisors.

Artificial Intelligence

Top-earning advisors are more familiar with AI and use data-mining analytics more frequently than their advisor peers.

AI, used by retailers and asset managers for many years, mines analytics to help advisors target clients with a more personalized, holistic planning approach, which investors say are key factors when choosing an advisor.

Clients Come First

Technology and AI data mining offer powerful tools, but the fundamental approach remains face-to-face meetings.

Whether these be monthly, quarterly or annually, the “face time” builds trust in a way that technology can’t, the report found.

A majority of top-earning advisors – 53 percent – also strongly agree that there should be one fiduciary standard to follow because it allows advisors and clients to make more informed decisions when working toward financial goals.

Find Tomorrow’s Clients

New clients mean new sources of profits and a larger percentage of successful advisors are likely to focus on millennials compared with all other advisors, the survey found.

Both top advisors and the rest of the pack are nearly evenly focused on Gen X as their primary target market as Gen Xers are in their prime earnings years and poised to build and inherit wealth over the next 20 years.

Top advisors trail all other advisors, however, when it comes to chasing baby boomers as their primary target, even as baby boomers control the lion’s share of assets.

Marketing Innovator

Changing and innovating around marketing strategies represents one area of significant differentiation between top advisors and the rest of the pack.

Researchers found that 69 percent of successful advisors changed their strategy to attract the next generation of clients compared to 60 percent of all other advisors.

Mobile technology, personalized, holistic advice and socially responsible investing are used to a greater degree among top advisors.

Heir Retention

Here lies another point of big differentiation: 84 percent of successful advisors have a strategy for retaining heirs compared with only 71 percent among all other advisors, the report found.

With a wealth transfer of about $30 trillion taking place over the next 30 years as baby boomers pass assets to heirs, it pays to keep family inheritors as clients – yet generational drop off rates have been as high as 65 percent to 90 percent, according to some studies.

Multi-generational teams, planning well in advance of the transfer and enlisting the help of specialists like estate planning experts are the hallmarks of top-performing advisors.

Taxation

Recent tax reform out of Washington has proved to be a catalyst for many top performers since taxes are the biggest single investment expense incurred by wealthier clients.

A greater percentage of top advisors are adapting a tax-advantage investing approach compared with the rest of the advisor pack, the researchers found.

Successful advisors are more likely than other advisors (74 percent vs. 57 percent) to say that tax reform will provide them with an opportunity to expand their services and generate more business around tax planning.

M&A

Top advisors are more optimistic about the impact of mergers and acquisition on their business compared to other advisors (57 percent vs. 49 percent) over the next 12 months, the research found.

Successful advisors see M&A as a way to adapt by tapping into larger advisories with more resources, particularly around technology and data mining. Top advisors like Alexander Gross say those things are key to generating more profit.

Top advisors are far more likely to say that M&A provides more opportunities to sell or merge the business with another practice.

Fee Compression

Technology and transparency are driving down fees, and have for some time.

Top advisors are very or somewhat concerned about fee compression, though a bit less so than all other advisors (63 percent vs. 70 percent), the survey found.

But top advisors are better prepared because they offer comprehensive holistic planning and that means they don’t compete simply on asset allocation or fund performance. Instead, they can focus managing the volatility of client emotions and plan for the longer term.

Succession Planning

Successful advisors are more likely than the rest of the advisor community to have a succession plan in place (80 percent vs. 69 percent), the researchers found.

Of the successful advisors and the rest of advisors who report having a succession plan in place, both groups say building a multi-generational advisor team is the No. 1 factor for an effective succession plan.

Top advisors are more likely than other advisors to focus on developing their respective firms’ C-suite by grooming replacements for their CEO and other top executives (15 percent vs. 10 percent) the survey found.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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