Displaying items by tag: wealth management

In an article for InvestmentNews, Kristine McManus, the Chief Advisor Growth Officer at Commonwealth Financial, discussed various considerations for advisors who are nearing retirement. Many want to exit their own business in a gradual way rather than suddenly and continue working with new owners to provide a seamless transition for their clients. 

According to Commonwealth's research, financial advisor M&A data over the last decade shows that there were 359 deals. In 205 of the deals, the advisor who was selling, immediately retired and exited the business. However, a third of the deals saw the advisors remain past the acquisition.

Some of the positives of this approach are that it leads to less client attrition and provides a natural way to introduce clients to the new management team. For the selling advisor, it allows them to gradually ease into retirement while slowly letting go of responsibilities in a more organic way while ensuring that their business and clients are in good hands.

There are some negatives which include a potential clash in management styles or investing philosophy between the seller and acquirer. Often, the selling advisor has difficulty giving up control when it comes to making major decisions and transitioning into an employee role. 

Overall, both parties need to be aligned in terms of goals and constant communication in order to minimize the negatives and accentuate the positives with this type of transaction.

Finsum: Many financial advisors are nearing retirement and need to have a succession plan.  One option that is growing in popularity is for advisors to sell their practice but remain as an employee for a certain amount of time.

At Morgan Stanley’s annual US Financials, Payments & Commercial Real Estate conference, CEO James Gorman said that the bank is no longer relying on financial advisors recruiting for growth. 

Gorman sees future growth coming from the ‘funnels’ that Morgan Stanley has built which it sees as key to the next $1 trillion in assets it aims to bring over the next 3 years. After a fevered pace of advisor recruiting, the company is seeing minimal movement other than small teams coming and going. 

As part of the changing landscape, Morgan Stanley will only be recruiting high-quality teams with substantial assets. This does affect the marketplace given that Morgan Stanley has been one of the most aggressive in terms of recruiting over the past couple of years. 

Overall, the bank is moving towards a more holistic, comprehensive strategy when it comes to acquiring assets. In the first quarter, it added $110 billion in new assets. $28 billion came from workplace channels, $20 billion came from advisors hired away from struggling regional banks, and the majority of the remainder came from existing brokers. 

In the future, Gorman sees the workplace channel as being its most significant source of growth, especially given that the cost of luring advisors continues to increase. 

Finsum: Morgan Stanley has been a leader in advisor recruiting. But, this is changing as evidenced by CEO James Gorman’s recent comments.

For RIAIntel, Holly Deaton discussed the findings of a research study which showed that often advisors are getting in their own way when it comes to growing their practice and effectively serving their clients.

In 2022, about 20% of financial advisors saw a decline in assets under management according to a study from Janus Henderson. The research also showed that many advisors are not being aggressive enough when it comes to asking existing or potential clients for new business due to the fear of being seen as too pushy. 

However, advisors need to move past these fears if they want to successfully grow their business. And, most advisors struggle with adding new clients and growing assets under management. In contrast, successful firms have a culture of growth and consistently take proactive steps to ensure a robust pipeline of future clients. 

In addition to these factors holding back advisors, only 30% of advisors have a business plan in place, while only 25% have marketing material that is targeted towards their ideal client. This is despite 93% of advisors agreeing that a business and marketing plan are essential to growth. 

Overall, advisors need to do a better job of aligning their actions with their goals. And, the key to accomplish this is overcoming psychological hurdles of appearing too pushy and spending less time on client service and portfolio management.

Finsum: Many financial advisors are falling short of reaching their business goals due to some psychological hurdles. For instance, advisors agree that it’s important to have a business plan but only a minority actually do.

In an article for InvestmentNews, Bruce Kelley covers how Goldman Sachs and Citigroup are looking to bolster their wealth management divisions. In this sense, these banking giants are behind their peers like Morgan Stanley and UBS who have been quite aggressive in recruiting financial advisors.

Currently, these efforts consist of recruiting experienced advisors, training younger advisors, and acquisitions of thriving practices. One challenge for Citi and Goldman Sachs is that recruitment of advisors is quite competitive, leading to higher prices and more generous terms. Additionally, technology has also given more tools and capabilities to advisors, shrinking the gap between megabanks and smaller practice. 

Despite this, Wall Street banks continue to see wealth management as an area of growth. On a recent earnings call, Citigroup CEO Jane Fraser said, ““We see a lot of potential for growth in Asia as we fill in the coverage across the full wealth spectrum there. We will be scaling up in the U.S. by building out the investment offering and cross-selling into our existing and new clients across the country.”

Similarly, Goldman sees its future growth opportunities coming from hiring more advisors. It’s looking to add to its stable of 1,000 financial advisors for wealthy clients in the US and internationally.

Finsum: Advisor recruiting has been heating up over the past decade. Goldman Sachs and Citigroup have fallen behind their peers but are looking to increase their efforts in the coming quarters.

A financial advisor practice’s long-term success is dependent on building a pipeline of prospects given that attrition and turnover is a given. While there are many paths to accomplishing this goal, one of the most effective is social media. In an article for WealthManagement, Doug Wilber shares some tips on how advisors can leverage social media.

This is especially true for advisors looking to connect with Generation Z and Millennials as these demographics are more comfortable and receptive to messages on these platforms relative to traditional media. Social media also gives advisors an opportunity to share their expertise, personality, and build trust with potential prospects.

On social media, authenticity is the most important metric. Over time, an advisor can build relationships with potential clients. According to surveys, about half of investors say social media influences who they choose as their financial professional. 

Another benefit of social media is that these channels are on 24/7 which means that these interactions can happen at any time. These platforms also have infinite scale which means that the effort of producing content is the same with a small or large audience. 

Finsum: Having a social media strategy is essential for financial advisors who want to bolster their pipeline of prospects and/or connect with Millennials and Generation Z.