Russell Investments Survey: 88% of Financial Advisers Change Approach

Sept. 9, 2010

Dynamic marketplace changes have prompted many financial advisers to change their approaches for clients, according to the new quarterly survey by Russell Investments.

“Many (financial advisers) tell us they are either being more conservative or reducing risk in client portfolios,” indicated author Phill Rogerson, who is the managing director, consulting services at Russell. “Client fear and uncertainty appear to be the primary motivation for this shift.”

Here are some of the Russell Sept.2010 survey responses:

  • 45 percent – moving to fee-based accounts from a transactional basis
  • 39 percent – selling more annuities
  • 9 percent – staying the course
  • 3 percent – inactive

Regarding risk-aversion fear of clients, 22 percent of advisers have become more conservative by decreasing the level of risk.

Fifty-nine percent anticipated shifting funds to global equities. That’s an increase of 11 percent over the results from Russell’s June 2010 survey.

Most are using strategic asset allocation vis-à-vis tactical for diversification of client portfolios.

Advisers confirm they feel challenged by their clients, as a result of volatility and decreasing revenue.

“In response, some advisors are taking a longer-term approach by transitioning their clients to a fee-based planning focus, while others are making short-term changes in response to investor demand for guaranteed income products and tactical market calls,” the study indicated.

“Modest signs indicate that investors may be slowly creeping back into the market, as the percentage of advisors who plan a shift away from cash increased 10 points from the June survey to 43 percent,” according to the survey. “The movement out of cash is tempered by opposite sentiment for other more conservative asset classes. Compared to three months ago, an average of 27 percent more advisors indicated they are shifting assets into corporate bonds, high yield bonds, and U.S. Treasuries.”

Our global digital age is also prompting changes in how advisers communicate with their clients:

  • 45 percent – use customer relationship management technology
  • 43 percent – “I’m leveraging technology to help scale my practice”
  • 35 percent –  “I’m discontinuing the use of hard copy material by emailing or delivering electronically”
  • 20 percent – “N/A; I’m not leveraging technology to communicate with clients”
  • 1 percent – “Engaging with existing and prospective clients on Facebook”

Russell tells advisers that revenue per client is most salient.

“Russell’s analysis in conjunction with advisory practice data from Moss Adams® suggests that the most profitable firms in the industry earn revenue per client ranging from $7,000 to $13,000, depending on the type and size of firm,” the study indicated.

So what’s a key take-away from the study?

“Russell believes that the most successful financial advisors will be the ones who focus first on goals-based planning and second on providing a diversified, global investment solution to implement the plan,” the study said.

From the Coach’s Corner, actually, while not a big surprise from my perspective, the survey results are interesting in confirming the issues facing advisers and their clients.

You can see the Russell survey results.

The Russell site: www.russell.com

The Moss Adams online address: www.mossadams.com.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.