Taking Care of Business

Internet Interaction

“Do you have a website?”

It’s perhaps no surprise that RIAs led the financial advisor pack when they were asked about their use of websites. The 180 RIAs who participated in the poll indicated by a margin of nearly 90 percent that they had a site. As entrepreneurs who run their own businesses, advisors in the channel are free to call the shots on whether to have a web presence and how that presence should look; advisors at brokerages have to clear those decisions with higher-ups.

But what shape those websites are in, asks Amy McIlwain, president of Financial Social Media, a Denver, Colo.-based consultancy. Many websites are static, first-generation tools, “pretty much an expensive brochure that’s sitting online.”  Now savvy advisors are positioning themselves as industry experts by posting self-produced blogs or videos on their sites, McIlwain says, or providing downloadable content, such as white papers with titles like, “Ten Biggest Retirement Mistakes.”

It’s possible that the 10 percent who don’t have websites never will, she adds. “They’ve been in business for a while, they’re nearing the end of their career, they don’t really want to change the model,” she says. “I’ll bet there’s a handful—small—that don’t use e-mail. Which sounds shocking, right? It’s almost as shocking as not having a website.”

Success with Succession

“Do you have a clearly documented succession plan?”

Succession planning clearly isn’t top of mind with most advisors—more than half the respondents in each channel report having no plan at all. Indeed, a report a year ago by Pershing Advisor Solutions says that 70 percent of advisory firms with $5 million or more in revenues either completely lack a succession plan, or at best have an inadequate one.

Yet RIAs have the least worst record for dealing with succession, with nearly 47 percent reporting some level of planning in place. Since advisors in the RIA channel are entrepreneurial, it follows that they are more disposed toward growing their business and having something large enough to leave behind in some fashion in the future.

Stuart Silverman, chairman emeritus of Fusion Advisor Network, thinks many advisors make succession planning more complex than it really is. He suggests advisors adopt a “Band-Aid” approach at the start, arranging for a short-term plan with a limited scope until they get a longer-term strategy in place. Such an arrangement ensures advisors “get the value for something you’ve spent your life building.”

Attention to Service

“What services do you provide to your clients?”

It’s no surprise that RIAs have a lower-than-average interest in insurance products, according to the survey this year. The poll found that nearly 59 percent of the 180 RIAs questioned offered insurance services, compared to an average of nearly 72 percent across all channels. Many RIAs are commission-averse, preferring fees on assets under management to payments for products whose recommendations would present advisors with conflicts. (Note the sharp falloff in interest in eldercare planning in the chart compared to the overall average; providing such services often involves using an insurance component.)

And yet many RIAs are dually registered, often to serve legacy clients with commission-based business. Aite Group analyst Alois Pirker spoke with one RIA recently for whom variable annuities made up about a quarter of her book; her clients were looking for retirement income. “If you’re trying to be a wealth manager, you have to be able to offer that, but not all of them do.” Pirker says. If advisors want to offer holistic service, they feel the need to get into the dually registered space, he says.

Taking Care of Money

“What percentage of time do you spend on each of the following activities?”

There are many reasons for a financial advisor to start his own business; managing money appears to exert a stronger pull on those in the RIA channel than elsewhere, judging from the survey this year. The poll surveyed 650 financial advisors, including 180 at RIAs. The FAs in the registered investment advisor space showed an above-average interest in portfolio management and market analysis than the average of all advisors in the survey, including wirehouses, IBDs, regionals and other channels.

“Overall, we can say the RIAs are definitely more in control of the investment management process,” says Aite Group analyst Alois Pirker. The rapidly evolving industry is making it easier for advisors to step into  portfolio management roles; more product platforms are available, Pirker says, and advisors are keen on retaining investment management fees rather than turning the money over to outside parties.

The greater interest in money management is offset by lower-than-average interest in client prospecting, client management and client presentation, the survey shows. Pirker isn’t surprised; the money management services that broker/dealers offer their advisors allow FAs in those channels to spend more time prospecting for and managing investors. RIAs have strong relationships with their clients and might not be hunting as aggressively as their peers in the b/d world, he says.