Advisers Expect Double-Digit Revenue Growth in 2011

Russell Investments' quarterly Financial Professional Outlook found 75% of advisers predict 2011 to be a year of substantial growth.  

Russell surveyed 800 advisers for the quarterly report. Nearly one-third (31%) predicted revenue growth of 10-14% in 2011 and almost half (44%) expect revenue growth of 15% or more.

“While the global economic recovery continues slowly, investor panic has largely subsided and advisers are now able to shift their focus back to meaningful long-term planning and wealth accumulation instead of triaging client concerns and addressing their anxieties,” said Kevin Bishopp, director of practice management for Russell’s private client services business.

The majority of advisers (86%) reported being optimistic about the capital markets over the next three years, up from 59% in December 2010. In last quarter’s survey, only 7% of advisers believed that their clients shared their optimistic views, but in this latest survey 36% felt their clients were optimistic about the capital markets in the coming years.

When asked what will drive anticipated business growth, 72% of respondents think new client acquisition will be a key contributing factor. Of those advisers expecting the revenue growth to be at least 15%, 88% said new client acquisition will be the primary growth driver. Generating more revenue from existing clients is expected is the second most expected reason for growth, followed by market appreciation.

However, Russell warns that focusing too much attention on attracting new clients is not necessarily the best tactic. “Russell encourages advisers to focus efforts internally first to drive significant results for clients and in turn build client satisfaction. Doing this can have a multiplier effect. Not only can you grow revenue from your existing client base, but you can also make clients your most influential advocates and in turn sources of quality referrals,” suggested Bishop.

Look to client segmentation for growth  

Russell found nearly one-quarter (23%) of advisers do not segment their client base. At 38%, assets under management (AUM) was the most common measure cited on which to base client segmentation, followed by revenue (16%).

Respondents also reported spending 50% of their time with their “top-tier” clients, which Bishopp considers low, given that top-tier clients typically generate 70-80% of an advisory firm’s total revenues.

“Advisers should devote 80% of their time and resources to top-tier clients, create leverage and efficiency in serving second-tier clients and evaluate which third-tier clients may in fact be over-served and unprofitable,” he said. “New client acquisition is cited as the primary driver of anticipated growth this year. However it is important to recognize that the best advisers obtain new clients from inbound referrals, not marketing or prospecting efforts,” continued Bishop.

Obstacles to reaching financial goals 

Russell's Financial Professional Outlook survey also found that while advisers and clients likely share the same concerns about reaching financial goals, the biggest concerns are different. Fifty-one percent of respondents believe that their clients feel their own lack of comfort with risk is a primary impediment, and 51% also pointed to the low-return environment as a major perceived obstacle amongst clients.

Advisers appear to share this apprehension around the low-return environment, with 43% pointing to this as an impediment to clients reaching their goals. However, the majority of advisers (58%), say that what concerns them the most is clients underfunding their retirement accounts.

“Advisers must work closely with their clients to help them understand that if they remain risk-averse for the long haul, they are likely to face a different kind of risk down the road: less money to spend in retirement or even running out of money in retirement,” concluded Bishop.