Abstract
The financial advisor business is growing and changing rapidly. Major insights in this Mintel report include:
- The demographics of the country are having a profound effect both on the type of businesses that advisors run, as well as they way in which they run them
- The imminent retirement of Baby Boomers will unleash billions of dollars in cash that will need to be managed over longer retirements than ever before, a potential treasure trove of business for well-positioned advisors
- Advisors are moving toward fee-based businesses rather than traditional commission-based compensation, but there is conflicting evidence as to the strength of this trend
- There is (and will continue to be) increasing competition in the industry, as traditional firms reinvent and restructure to meet changing market demands
- Professionals such as CPAs are entering the market and offering many of the same financial-planning services offered by financial advisors
This report examines the trends and opportunities within the financial advisor distribution channel, including an overview of how US demographics affect products and services. Mintel describes some of the new products finding a place in investor portfolios. There is also extensive description of investor attitudes towards financial advisors, and descriptions of investing behavior, especially as it relates to retirement.
Table of Contents
- Scope and Themes
- What you need to know
- Scope of this report
- Abbreviations and Terms
- Terms
- Executive Summary
- Overview
- Changes in the advisor business
- Advisors and their clients
- The financial advisor market
- Alternative investments
- Advisors and retirement
- New markets for advisors
- Advertising
- Market Size and Segmentation -- Advisors
- Financial services and advisors
- Figure 1: Largest U.S. financial services firms by revenues, 2006
- Figure 2: Change in number and percentage of advisor by type, 2005 and 2007
- Advisory firm market
- How the advisory business breaks down
- Commissions vs. fees
- Figure 3: Fees vs. commissions, 2000-03
- Market Size and Segmentation -- Consumers
- Use of advisors by consumers
- Figure 4: Investors who use a financial advisor, January 2008
- Figure 5: Use of financial advisor by age, January 2008
- Figure 6: Percentage of advisors' client base, by age, 2008
- Figure 7: Type of advisor used by those who have an advisor, January 2008
- Figure 8: Use of advisor by respondent age group
- How advisor-client relationships are established
- Figure 9: How respondent found advisor, by gender, January 2008
- Figure 10: How respondent found advisor, by age, January 2008
- Figure 11: Length of Advisor relationship, by gender, January 2008
- Figure 12: Length of Advisor relationship, by age, January 2008
- What are investors looking for from advisors?
- Figure 13: Services provided by advisors, by gender, January 2008
- Figure 14: Services provided by advisors, by income, January 2008
- Figure 15: Services provided by advisors, by marital and employment status, January 2008
- Generational Differences in Investing
- High-net-worth households
- Figure 16: Breakdown of portfolios by generation, 2007
- Baby Boomers
- Figure 17: Ownership of various financial products, January-September 2005
- Figure 18: Attitudes regarding investments and financial planning, January-September 2005
- Attracting Gen X and Gen Y Clients
- Gen X
- Competitors targeting Gen X
- Charles Schwab
- Fidelity Investments
- Thrasher Capital Management LLC
- Principal Financial Group
- Competitors targeting Gen Y
- American Century Investments
- Wealthiest Americans and Advisors -- Segmenting by Assets
- Figure 19: Primary investment provider (type of company with largest portion of assets), 2005-06
- Why do they go there?
- What are their concerns and goals?
- Figure 20: financial goals of millionaires, 2007
- Investor understanding
- Customer satisfaction
- Figure 21: Advisor strengths, by gender, January 2008
- Figure 22: Advisor strengths, by age, January 2008
- Pre-retirees and retirees
- Figure 23: Top rated full service brokerage firms
- Competitive Context--Part I
- Who are financial advisors?
- What kind of financial advisors do investors use?
- Figure 24: Type of advisor, by gender, January 2008
- Figure 25: Type of advisor used, by age, January 2008
- How much of the investment portfolio do advisors control?
- Figure 26: Percentage of assets that is with advisors, by gender, January 2008
- Figure 27: Percentage of assets that is with advisors, by age, January 2008
- Registered Investment Advisors (RIAs)
- Figure 28: Growth of retail RIA firms and assets, 2005-07
- Growth in RIA firms
- Figure 29: Projected growth of RIA firms, 2007-12
- What makes a successful RIA?
- Figure 30: Time spent with clients, top firms. vs. all firms, 2007
- Challenges to RIAs
- RIA service agents
- Largest service agents
- Figure 31: Service agents -- Total RIA client assets as of Q1 2007
- Charles Schwab
- Fidelity
- TD Ameritrade
- Competitive Context--Part II--How RIAs can Increase Their Business
- Financial planners
- Figure 32: Top three reasons for using a financial planner, 2007
- Figure 33: Top three reasons for not using a financial planner, December 2007
- Targeting women
- Figure 34: CFPs, by gender, 2007
- Other CFP demographics
- Figure 35: CFPs, by age, 2007
- Figure 36: CFPs -- highest degrees earned, 2007
- Figure 37: Credentials held by CFPs, 2007
- Figure 38: CFPs by type of business, 2007
- Brokers
- Figure 39: Type of financial institution respondents prefer, September 2007
- Figure 40: Top North American wirehouses, regionals and discount brokers ranked by retail reps
- Certified Public Accountants (CPAs)
- Market Drivers
- Personal wealth
- Demographics
- Figure 41: U.S. generations, 2002-12
- Baby Boomers
- Figure 42: U.S. population projections, 2002-12
- Gen X
- Gen Y
- Trend toward fee-based management
- Figure 43: Investors using fee-based vs. commission-based advisors, January 2008
- Figure 44: Considered fee-based vs. commission-based as a factor in choosing an advisor, January 2008
- Why go to fee-based?
- However, brokers need to remain commission-based
- Advisor satisfaction and retention
- Figure 45: Most important factors in advisor job satisfaction, 2007
- Changing product mix
- Trends in product mix
- SMAs
- Figure 46: Growth in percentage of advisors who use SMAs, 2007 and 2009
- ETFs
- How the wealthiest Americans use alternative products
- Figure 47: Reasons for allocation to alternative investments, 2007
- Advisors and retirement planning
- Figure 48: Populations of baby boomer cohorts, based on 2005 projections of 2000 U.S. Census Bureau data
- Figure 49: Ownership of various financial products, January-September 2005
- Who do investors trust for retirement advice?
- Figure 50: Types of firms trusted togive retirment planning advice, by gender, September 2007
- Figure 51: Types of firms trusted to give good retirement planning advice, by income, September 2007
- Advertising and Promotion
- Figure 52: Top ten advertising categories, Jan-Sept 2007 vs. Jan-Sept 2006
- Online advertising
- Figure 53: Online ad spending by industry, December 2007
- Figure 54: Top 50 rank and advertising expenditures for financial services companies, 2006
- Figure 55: Top 10 financial services online ad spenders, December 2007
- Other advertising
- Campaign trends
- Thrasher Capital Management
- Fidelity
- Figure 56: Fidelity print ad, October 2007
- Figure 57: Fidelity print ad, August 2007
- Figure 58: Fidelity print ad, January 2008
- Figure 59: Fidelity print ad, October 2007
- Figure 60: Fidelity television advertisement, 2007
- Schwab
- Figure 61: Schwab television advertisement, 2007
- Figure 62: Schwab print ad, October 2007
- Figure 63: Schwab print ad, November 2007
- Figure 64: Schwab print ad, November 2007
- Figure 65: Schwab print ad, October 2007
- Figure 66: Schwab print ad, October 2007
- Figure 67: Schwab print ad, August 2007
- Figure 68: Schwab print ad, March 2007
- Figure 69: Schwab print ad, September 2007
- Figure 70: Schwab print ad, June 2007
- Merrill Lynch
- Figure 71: Merrill Lynch print ad, January 2008
- Figure 72: Merrill Lynch print ad, December 2007
- Figure 73: Merrill Lynch print ad, December 2007
- Figure 74: Merrill Lynch print ad, December 2007
- Figure 75: Merrill Lynch print ad, October 2007
- Figure 76: Merrill Lynch television ad, 2007
- TD Ameritrade
- Figure 77: TD Ameritrade print ad, June 2007
- Figure 78: TD Ameritrade print ad, June 2007
- Figure 79: TD Ameritrade print ad, April 2007
- Figure 80: TD Ameritrade print ad, February 2007
- Bank of America
- Figure 81: Bank of America print ad, November 2007
- Figure 82: Bank of America print ad, November 2007
- HSBC
- Figure 83: HSBC print ad, June 2007
- Citigroup/Smith Barney
- Figure 84: Citigroup print ad, March 2007
- Figure 85: Citigroup print ad, March 2007
- Wells Fargo
- Figure 86: Wells Fargo print ad, November 2007
- Credit Suisse
- Figure 87: Credit Suisse television ad, 2007
- UBS
- Figure 88: UBS television ad, 2007
- Wachovia Bank
- Figure 89: Wachovia television ad, 2007
- Appendix: Industry Associations
- Appendix: Additional Consumer Data
- Survey results by region
- Figure 90: How respondent found advisor, by region, January 2008
- Figure 91: Length of advisor relationship, by region of the country, January 2008
- Figure 92: Type of investment advisor, by geographical region, January 2008
- Figure 93: Percentage of assets with advisor by region, January 2008
- Figure 94: Types of firms trusted to give good retirement planning advice, by region, September 2007
