Top brokers increasing revenues, assets, study says

A Toronto-based software provider has crunched data from more than 5,000 brokers across North America who use their products, finding investment advisors on their platform are ramping up both their revenue and asset growth.

In a recent study, PriceMetrix identified the qualities that distinguish top producers from average advisors.

PriceMetrix concentrated on two groups, “growth all-stars,” — who are in the top 50th percentile for total assets under management, and “VIPs,” — advisors in the top 10% in AUM.

Both groups fared well in the study period (August 2005 to August 2006), with the top 100 growth all-stars seeing average increases in assets of $15 million US, increased revenues of $168,000 US and increased average assets per household of $41,000 US.

“The Growth All-Stars finished the 12-month period with $111 million US in assets and $981,000 US in production: a very impressive group,” said PriceMetrix president Doug Trott. “The Canadian Growth All Stars using our platforms have demonstrated a highly-disciplined approach to managing the growth of their business, and in creating high-performance financial value for their clients, their firms and for themselves.”

Interestingly, the top 100 advisors surveyed by PriceMetrix have increased the amount of average household assets managed by 19%, without increasing the average number of actual households.

The group is doing a better job of increasing wallet share with existing clients through a number of methods, PriceMetrix says, including diversifying clients into different products or tax-deferred accounts, and building trust by investing the right amount of time on client contact.

“Clearly when you give financial advisors the right tools, even in flat markets, they can generate organic growth through better management of their book, and drive better segmented sales and marketing efforts” Trott says.

In addition, the all star group has actually decreased the size of their average trade, while at the same time increasing asset growth. “Dispelling the notion that reduced commission levels are required to fuel growth, they have not lowered their price below what their peers are charging in their effort to expand their business,” the study notes. “Instead [they] have used pricing as a strategic business tool by selectively discounting their larger trades and their most important clients.”

Other strategies employed by top performers include efforts to increase the assets of existing moderate sized households, and setting clear pricing expectations. “They have, on average more than 140 households paying them more than $1,500 US per year for their full service offering, compared to average performers who have just 62 households meeting that revenue threshold.”

PriceMetrix also examined the books of 25 advisors with revenues of more than $2 million US, finding their revenue growth was up $12% and assets under management had risen 11% to $277 million US.

Comparing the two groups, their study found that both had strong client relationships and a large portion of their books consisting of households with investable assets of more than $100,000 US. The two groups were also clearing out “stagnant” households and moving clients into fee-based products in an attempt to generate a recurring stream of assets. “By segmenting their book and moving more of their assets into fee-based products, they are able to make more effective use of their time by full servicing the right clients.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com