5th Annual Dollars and Sense: Advisors swamped by paperwork

If you feel like you’re being deluged with paperwork and administrative duties, you’re not alone. It’s cold comfort to be sure, but 25% of your colleagues cited this as their greatest day-to-day challenge in the ADVISOR Group’s fifth annual Dollars & Sense Survey, placing it at the top of the list.

Last year, administrative tasks ranked second, with 14% calling it their greatest challenge, and top place went to prospecting. This year, prospecting remained a concern, taking second spot, with 21% listing it as their greatest challenge.

Whether through prospecting, increased client investment or as a result of strong capital markets, the value of both your client’s portfolio and your assets under management increased over last year. The overall average client portfolio grew from $129,652 last year, to $146,200 in 2006, a gain of almost 13%.

The mean value of assets under management spiked in 2006, to $34.9 million, up from $27.2 million in 2005, an increase of 28%. According to the survey, 21% of advisors manage between $10 million and $24.9 million, making this the largest single segment of the market.

The majority of respondents (58%) declared their practice’s gross revenues to be under $250,000, with another 18% of shops earning between $250,000 and $499,000. Commissions remain the most popular source of compensation, with 53% getting paid this way. Twenty-two per cent are paid by salary plus bonus, while 15% collect both fees and commissions. Just 1% describe their practice as fee-only.

Smaller books were also common, with 19% of respondents managing under $3 million.

The average advisor earned an annual income of $123,600, managing 292 client portfolios. The average “top” advisor, on the other hand, earned $294,400 and had 342 clients. Their average client portfolio totalled $360,000, compared to the average advisor’s $146,200 portfolio.

The majority of respondents (54%) said their business focus was on financial planning, while 24% described themselves as investment advisors. Insurance specialists made up 11% of the survey sample.

Among designations, 50% of respondents listed themselves as CFPs, with another 14% holding Quebec’s Pl.Fin. designation, and 11% holding the PFP. Eleven per cent of respondents have the CLU designation.

The MFDA can count 54% of respondents as registrants, while 29% are registered with the IDA/Accovam and 20% with Quebec’s AMF. There was a marked difference between average and top advisors, with 66% of top advisors IDA-registered, compared to 29% of average advisors.

Mutual funds remain the most popular investment choice, with 88% of respondents selling or recommending them to their clients. Fund wraps and managed accounts were sold or recommended by 44% of advisors, a marked increase from 28% in 2005. Investing in individual stocks garnered only 20% of support, ranking below bond investments (30%).

On the insurance side, 66% are recommending term policies, 48% of clients buying holding such policies. Fifty-seven percent of advisors are recommending universal life, with 19% of clients buying. Only about half of advisors are recommending living benefits such as critical illness (54%) and long-term disability (47%). These continue to be tough sells, with just 17% of clients holding long-term disability, and 8% buying CI. Ranking last is long-term care, with an uptake of just 3%.

The fifth Annual Dollars and Sense Survey was conducted among a representative sample of 1,183 of Canada’s financial advisors between June 20th and July 20th, 2006. The margin of error for a project this size is plus or minus 2.8%, 19 times out of 20.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com