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Graying Books, Antsy Clients Stir Up Headwinds

April 9, 2014

Despite rising assets and revenues, clouds hover over the financial-advice industry. Growth last year was largely driven by a continuing rebound in stocks, says market researcher PriceMetrix. At the same time, client-retention rates showed a slight dip in 2013.

“Usually, you see smaller clients sort of come and go at a faster rate than larger clients, but ... we’re seeing higher rates of attrition for even the most affluent clients,” PriceMetrix cofounder Patrick Kennedy tells The Wall Street Journal.

Positive signs included an 11% rise in assets and a 6% increase in revenue. Also, the number of high-net-worth households using a financial advisor grew, while the average advisor managed $90.2 million in 2013, an increase from $80.8 million in 2012.

“On the surface there’s a lot to be happy about,” Kennedy says in Financial Planning magazine. But with the average client’s age now more than 61 and the typical advisor’s book maturing at a steady pace, “if something isn’t done, you have a very scary scenario for average client age in 20 years,” he says.

Clients seem to be pulling assets a bit more frequently these days, according to the data. Kennedy attributes much of that movement to investors becoming greedy during strong bull markets and pulling assets if they feel their advisor is underperforming market trends.

But let’s keep all this in perspective. The average client-retention rate, per the most recent data, is still around 90%, and last year’s dip was on the order of some 2 percentage points.

The bigger issue facing planners could be how to market themselves effectively to new prospects without sacrificing service to existing clients. That’s a balancing act that many industry observers warn won’t get easier any time soon.

By Murray Coleman
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.
  • To read the Financial Planning article cited in this story, click here.