Welcome to Financial Advisor IQ

‘Underserved’ Wealth Markets Revealed (July 11)

By Murray Coleman December 30, 2016

One of the most forwarded articles of 2016 was an exclusive study for FA-IQ that unearthed the most underserved and oversaturated advice markets in the country.

The old business-building mantra — location, location, location — holds as true for financial advisors as it does for any other enterprise.

In fact, despite a bevy of research showing wealth management has become an over-populated profession, some advisors say they’re operating in markets with definite competitive advantages.

New data compiled exclusively for FA-IQ show FAs in at least 10 key markets are sitting relatively pretty.

These areas are characterized by less “density” in terms of local advisor headcounts. At the same time, such markets are generating high levels of disposable income.

“Despite a wave of new firms flooding into the field by breakaway advisors or mergers between old-line firms, several affluent pockets of opportunity still remain in wealth management,” says Steve Scruton, head of Broadridge Advisor Solutions, an advisor-centric marketing and data analytics unit within Broadridge Financial Solutions, a securities processing, clearing and investor communications firm based in Lake Success, N.Y.

Southern Florida remains a particularly attractive hot spot, according to the research firm, which examined the country’s top 50 metropolitan markets for FA-IQ.

Using government sources as well as its own database of U.S. advisors, Broadridge’s analysts crunched information relating to each area’s FAs, households and estimates of investable assets per family.

Broadridge then ranked each location by actual wealth available to invest by that broad pool of potential clients. The firm's analysts also compared those findings to advisor headcounts in each market.

“If you’re looking to place wealth managers just based on general data like census reports on population growth trends, you might be inclined to put them in places like New York or Los Angeles,” says Scruton.

But taking a more nuanced approach reveals a different picture.

Density mapping techniques as used by Broadridge rank many of the country’s metropolitan statistical areas at the bottom of the list, indicating a relative level of oversaturation.

Besides Los Angeles, New York and Chicago, the densest MSAs in terms of confluences of affluence and advisor coverage include Newark, N.J., Philadelphia, Wilmington, Del., Atlanta, Denver and Phoenix. (See interactive map below.)

Interactive Map: Most under- and overserved cities in America

Click on a city to see its financial advisor market saturation.

By contrast, as noted by such data, several areas in Florida stand out as fairly underserved. Those include the Naples-Immokalee-Marco Island region, Cape Coral-Fort Myers and the greater Sarasota-Bradenton metropolitan market.

Advisor Geoffrey Frazier of Global Financial Private Capital in Sarasota, Fla., says economic growth and favorable tax policies provide “incentives to affluent families to keep the bulk of their money here.”

Frazier, who has worked in the area for the past 25 years, says he’s seen nearby communities evolve from sleepy resort destinations to bustling commerce centers.

Snowbirds and retiring natives seem to like Florida’s lack of a state income tax, says Frazier, whose firm manages $6 billion. As a result, he rarely has to compete for new business with clients’ previous advisors.

Another highly-ranked market is southern California. At number four, the Oxnard-Thousand Oaks-Ventura region has been growing at the expense of neighboring big cities for decades.

“We’re sandwiched between LA and Santa Barbara, close enough for commuters but big enough now to be a major employment center for a good variety of fast-growing companies,” says Juan Ros, a longtime advisor at Lamia Financial Group in Thousand Oaks, Calif.

The surrounding Ventura County wealth market has blossomed into a major “corridor of commerce” for southern California over the past 20 years, he points out.

But places like Los Angeles, Santa Barbara and the San Fernando Valley continue to be more popular landing spots for advisors, says Ros, whose employer manages more than $200 million.

While competition is fierce for new business, he believes many cities to the west of such SoCal population hubs are “largely underserved” by the industry’s rank-and-file.

“The rapid growth we’ve seen in this corridor’s local economy is making it difficult for a host of different professional services — particularly wealth management — to keep up,” says Ros.

At the same time, San Francisco might be deemed dominant in northern California’s wealth community by sheer numbers of advisors working in the area.

But the study suggests nearby cities in Silicon Valley – bubbling with tech entrepreneurs and millionaires flush with IPO windfalls – are among the most underserved in America’s top 50 MSAs.

These include markets ranging from San Jose and Sunnyvale to nearby Santa Clara.

“In many ways, advisors in Silicon Valley still work in San Francisco’s shadow,” says Jeff Pietsch, who runs San Jose-based Concert Wealth Management, which manages about $2 billion.

Living just south of a major metro center has its advantages, he adds. Advisors at the firm, which manages about $2 billion, work in a more "laid-back" community atmosphere where "quality of life" issues take center stage, according to Pietsch.

“Despite a large amount of new wealth being formed in Silicon Valley,” he says, “we feel like this is still an area that’s flying under a lot of advisors’ radar.”

But not all pockets of underserved affluence highlighted in the study are in sunny states. For example, Rochester, N.Y. and Providence, R.I. land in the list’s upper tier. Also among top 10 locales is Connecticut’s Bridgeport-Stamford-Norwalk market. In the top 15 are Raleigh, N.C. and Portland, Ore.

Meanwhile, Omaha, Neb., is even higher rated as the sixth most underserved wealth market.

Besides serving as the home of Berkshire Hathaway and its famed chairman, Warren Buffett, Omaha is headquarters to Fortune 500 firms like Union Pacific, Kiewit and TD Ameritrade.

Awareness of the value of saving for retirement and strategic investing is high in the region, says Mark Lookabill, an advisor at Carson Wealth in Omaha, which manages $3.1 billion. Combined with a strong employment base, he finds “a tremendous amount of stability here in terms of people staying around after college to live and work in the area.”

As an advisor, Lookabill believes such a hometown bias supports his long-term relationship-building efforts as an advisor.

“Even when people move, we often are referred to other family members who remain in the area,” he says. “So for us, Omaha remains a great base to maintain and expand the clients we serve as our practice grows.”

Read the original article, published July 11, here.