FINANCIAL Services Industry

Industry Realities

Lost in Translation

  • Only 38 percent of advisors have a clear recovery strategy and communicate it with confidence. This means that nearly two-thirds of advisors are incapable of guiding their clients through this crisis.
    (Source: Registered Rep)
  • "There's approximately 10% of the total financial advisors of the major firms that practice true wealth management or have a holistic, consultative practice. Which means 90% do everything else."
    (Source: Rick Capozzi, Managing Director, Morgan Stanley Global Wealth Management Group)
  • More than three-quarters of financial advisors say they have not lost clients, and in some cases have even gained clients. So how can it be that more than three-quarters of affluent clients say they plan to move money...who's lying?
    (Source: "Who's Lying: Clients or Advisors", March 2009, FA Magazine)
  • The term "wealth management" is grossly overused in the financial services industry today. The vast majority of financial advisors-77.9 percent, according to a Prince/Geracioti study call themselves wealth managers. Yet just 8.4 percent truly fit this description, according to data obtained in a study of 1,177 financial firms. The others act as investment generalists (79.1 percent) or product specialists (12.4 percent).
    (Source: Wealth Management (Wealth Management Press, 2003); Prince & Associates, 2004. Analysis: CEG Worldwide, LLC.)
  • "Wealth-management business CEO's rate only 17 percent of their current client relationship managers as having the skills to manage the needs of their clients."
    (Source: PricewaterhouseCoopers' 2007 Global Private Banking/Wealth Management Survey)

Plunging Digits

  • In 2008, 87 percent of advisors said they were "somewhat" to "very" satisfied with their career. In 2009, that figure dropped to 62 percent. (Source: Registered Rep)
  • Spectrem Group Study:
    • The population of millionaires has taken its biggest percentage plunge since the firm started collecting data about 10 years ago. Households in the U.S. with a net worth of at least $1 million, excluding primary residences, has dropped to 6.7 million in 2008 from 9.2 million in 2007.
    • The number of households with investible assets of at least $1 million fell by 26% to 4.4 million from 5.98 million.
    • Households with a net worth of $5 million or more are also declining. Their numbers fell to 840,000 from 1.16 million
    • Almost half of all millionaire households lost more than 30% of their net worth, while a full 17% say they lost at least 40% of their money.
  • The total net worth of Americans was $51.5 trillion as of 12/31/08, down 18% in the last year, reaching its lowest level since 9/30/05 (source: Federal Reserve).

Investor's Frustrations

  • 80.6% of investors plan to take away money from their advisor
  • 44.7% of investors will not recommend their advisor to other investors
  • 56.7% of investors plan on leaving their advisor
    (Source: September 2008, Prince & Associates, Inc.)
  • Only 2% of investors with more than $1 million in investable assets plan to recommend their firm to other investors
    (Source: Tiburon report Current Events: Making Sense of The Impacts)
  • 36% of millionaire households are unhappy with their advisor's performance, while only 14% say they plan to make more use of advisors in the future. (Source: Spectrem Group)
  • Why financial advisors lose their clients:
    1. Poor service
    2. Inadequate communication
    3. Advisors not being honest and upfront about their fees (Source: Spectrem Group)
  • Thane Stenner, founder of Stenner Investment Partners, says many wealthy investors are displeased and unsettled about their current advisory relationships, but they are unsure what to do about it.


  • "The typical baby boomer is still 14 years away from retirement, which means that wealth accumulation is still a big issue for 77 million of them"
    (Source: September 2008, ONWALLSTREET)
  • Of the more than 10,000 Americans that were surveyed early last summer, only 27% were confident that they had or were saving sufficient money for their retirement. Another 23% were not sure.
    (Source: Retirement Made Simpler)
  • 31% of current American workers have done no planning or saved any money for their future retirement
    (Source: Principal Financial)
  • 4 in 10 (40%) Mass Affluent investors do not have a financial plan. Of those without plans, 40% think they are important and nearly one-fourth would like to have a professionally prepared plan.
    (Source: Spectrem Group)
  • Survey of 1,305 independent financial advisors conducted by Curian Capital LLC, a Denver-based registered investment advisor, reports:
    • 90% of advisors feel that at least 20% of their clients don't have enough money
      set aside to retire at their expected income levels
    • 40% of advisors feel the biggest threat to their clients' retirement planning is a lack of time to build wealth
    • 69% of advisors say they haven't changed their clients' portfolios in the face of market volatility
    • Contradictory result: the survey shows 97% of advisors say retirement income planning is the most valuable asset they provide clients, and yet 55% would outsource that planning to a third-party asset manager.

Industry Breakdown

  • "The wealth management practices of the Wall Street firms and big banks are broken. Again."
    (Source: FA Magazine)
  • Tiberon research notes on client segmentation. Summary conclusion is that there are an abundance of advisors chasing a small population of target clients:
    • Over 400,000 Financial Advisors in all competitive channels
    • 70,000 are at major wirehouses
    • 80,000 are independent broker dealers
    • Household segmentation (per advisor)
      • 270 hh per advisor in US
      • 133 hh with more than 10m
      • 70 hh with more than
      • 100m hh with more than 1mm
    • Other interesting facts:
      • 56 percent of those over 1mm use a wirehouse advisor
      • 27 percent use an independent broker dealer
      • Average independent broker dealer has a 53 % pre-tax profit margin
      • 33 percent of IBD's have a CFP
      • 13 percent of assets at IBD's came direct from wirehouse firms.

Market Conditions

  • THE LAST 5 MONTHS - During the worst bear market ever for the S&P 500, the stock index fell 86.2% over a 33-month period (i.e., 9/06/29 to 6/01/32). More than half of the 86.2% decline occurred during the last 5 months of the 33-month period. From 12/31/31 to 6/01/32, the S&P 500 fell 45.8%. From its all-time high set on 10/09/07, the S&P 500 has fallen 51.7% over the last 17 months to last Friday's close. In the last 5 months, the S&P 500 has fallen 24.6%. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market
    (Source: BTN Research).
  • CATCHING UP - Over the last 15 years (1994-2008), the S&P 500 is up +6.5% per year on a total return basis. In order to have a trailing 20-year average annual total return of +10% by the end of the year 2013 (i.e., 5 years from now), the S&P 500 would have to produce average gains of +21.3% per year over the 5 years 2009-2013
    (Source: BTN Research).
  • A weekly survey of stock investors indicated 70% of them were bearish as of 3/04/09, the highest bearish measurement ever recorded by this study
    (Source: American Association of Individual Investors).
  • 4 out of every 7 American families (57%) have experienced stock losses (i.e., realized or unrealized) of at least $100,000 during the current bear market. From its all-time closing high set in early October 2007, the S&P 500 is down 56.3% through last Friday's close
    (Source: Kiplinger's, BTN Research).