RIAs Pump up Client Efforts

Nearly half of registered investment advisers (RIAs) reported gaining clients and improving client satisfaction in the last year, according to the latest study of how RIAs fared during the financial crisis.

Nearly half (47%) of the RIAs surveyed said that they thought the economy had a positive impact on their clients’ level of satisfaction with their services, according to the study, commissioned by Scottrade Advisor Services.

Scottrade found similar results to other recent surveys by custodians: RIAs might be crunched for cost in some areas, but they are still growing—and the largest inflow of new clients is from brokerage firms (see “RIAs Expect More Growth in Next Five Years” and “Independent Advisers Feel Good about Future”).

Investors who dumped full-service brokerage firms were the largest source of new client acquisitions for RIAs, with nearly a third of RIAs (31%) reporting ‘breakaway’ investors as their top source of new clients, according to the survey. Advisers said poor performance (51%) and the desire for personalized attention (61%) are leading clients away from brokerage firms to RIAs.

“A lot of investors found themselves looking for more one-on-one attention from their advisers,” said Brian Davis, Scottrade Advisor Services’ manager of business development. “RIAs are able to provide investors with an enhanced level of personalized service and in many cases were able to capitalize on this need.”

Interestingly, newer RIAs (those with 10 or fewer years of experience) were more likely to report growth in their client base than RIAs with 11 or more years of experience (56% versus 41%). Furthermore, twice as many tenured RIAs reported losing clients than newer RIAs (20% versus 9%).

That can be explained because client acquisition is more important to start-up RIAs, Davis said.

“Established RIAs with greater financial resources aligned their focus toward managing client relationships through education and counseling,” he said. “Start-up RIA firms tend to focus their efforts on client acquisition. Client acquisition is vital to the survival of new RIA practices and even more so during an economic downturn. In doing so, firms are in a better position to thrive during an economic recovery.”

RIAs also reported seeing more prospective and new clients near or in retirement than in years past. About three-fourths (74%) of surveyed advisers said they met with more Baby Boomers (ages 43 to 64) and nearly half (47%) said they met with more seniors (age 65 and older). Only 8% saw more Generation Y clients (18 to 26).

Taking Action

Some RIAs met the challenging economy by spending more time with clients and more heavily marketing their firms. More than half (54%) of RIAs invested more time in informing and coaching their clients, according to the Scottrade survey.

A little more than a one-third (36%) turned to marketing to help grow their business. The same percentage of surveyed advisers created or enhanced their firms’ Web sites, and more than a fourth (26%) developed new sales materials.

Many advisers also sought to increase their visibility in the financial services community by more activity pursuing networking opportunities (36%). One in 10 joined an industry or professional organization.

Amid shrinking resources, RIAs were challenged to maintain service levels with increasingly demanding clients, Scottrade said. The top three changes that RIAs saw in their clients’ behavior as a result of the economic conditions over the past year included: asking more questions about their accounts (47%); checking in on their accounts more frequently (37 %); and calling more often (30%).

“Many people see a challenging economy as an obstacle, but in some cases it can be an opportunity,” Davis said. “For many RIAs who put in the extra effort and stepped up their marketing and client-service activities, their hard work paid off. By going the extra mile with their clients, these RIAs have been able to weather the storm.”
The 2009 Registered Investment Advisor Study by Scottrade Advisor Services polled 226 RIAs online from August 12 to September 30.