PriceMetrix Inc.

PriceMetrix Inc.

March 05, 2012 09:00 ET

Fee-based Growth Strong, Mixed Picture Overall in 2011 for Retail Advisors, According to Annual PriceMetrix Report

Mix of Business Significantly Better as Advisors Shed Small Households

TORONTO, ONTARIO--(Marketwire - March 5, 2012) - The retail wealth management industry endured a period of modest growth in 2011, according to a new annual report on the state of the business from PriceMetrix, the first choice in practice intelligence solutions for retail brokerages in North America. Average advisor production grew one percent during the year, reaching $537,000. At the same time, however, the average advisor's assets under management dropped seven percent to $74 million from $79 million in 2010.

"Despite the fact that revenues, and certainly assets, didn't improve as much as they did in 2010, the general health of the retail wealth management industry remains strong," commented Doug Trott, President and CEO of PriceMetrix. "PriceMetrix data shows that average assets are still higher than they were in 2009 and average revenue has increased from $453,000 in 2009 to $537,000 in 2011."

Additionally, advisors and their firms are significantly rebalancing their current portfolios away from smaller and less productive households to larger and more productive ones. The average number of households per advisor dropped eight percent in 2011, from 192 to 177, with the reduction coming primarily from small households, which are defined as having less than $250,000 in investable assets. Industry-wide, the percentage of small households in the average advisor's portfolio has declined from 71% to 65%. Favorably, from 2010 to 2011, the average household revenue has increased seven percent, rising from $2,954 per household to $3,174, indicating advisors are now spending more time on bigger, more productive clients.

"With a reduced number of households, advisors have more capacity to better service their remaining households and accounts, and to focus on adding more of the households and accounts they desire," noted Doug Trott.

There is more evidence advisors are doing just that. They are opening fewer new small household accounts and are instead concentrating on opening larger ones. Assets from large households, which are defined as $1 million or more in assets, now represent 57% of all new assets added, which is a 12% increase over 2009. Advisors are also opening additional accounts in existing households. The percentage of households with more than one account has increased from 52.8% in 2009 to 56.2% in 2011.

PriceMetrix' report is based on the company's aggregated retail brokerage data which includes information on three million investors, 500 million transactions, one million fee-based accounts, four million transactional accounts and over $900 billion in investment assets. This year's report is PriceMetrix' second annual report on the state of the industry.

PriceMetrix has also found that advisors and firms are increasingly transitioning to fee-based accounts. The number of fee-based accounts for the average advisor increased ten percent in 2011 to 85 accounts. Since 2009, the average number of fee-based accounts per advisor has increased more than 35%. Fee-based assets, as a percentage of total assets, also rose 13% last year, while fee-based revenue, as a percentage of total revenue, rose ten percent.

While fee-based revenue is rising, average return on assets has declined. Average RoA for fee-based accounts has dropped from 1.23% in 2009 to 1.19% in 2011. One of the major reasons for the decrease is that new accounts are being priced at a rate that is far below existing fee relationships, which is troubling given the number and size of new fee-based accounts being opened. The average new account has an RoA of just 1.06%.

"Advisors have a great opportunity to improve their businesses if they can increase the amount they charge for their new fee-based accounts," said Doug Trott. "Indeed, there's some evidence that they're beginning to do that. In 2009, the average RoA for new accounts was 1.03%, now it's 1.06%."

PriceMetrix' report notes there are several other opportunities available for advisors and their firms to improve their businesses in 2012.

  • Thirty percent of the typical advisor's portfolio is made up of households which produce less than $150 in annual revenue. These can be reviewed and dropped in favor of higher producing clients.

  • New fee-based accounts are being opened at an 11% discount to existing relationships. Advisors can focus on closing the gap between new accounts and existing ones.

  • More than 100 basis points separate premium and discount fee pricers. Closing this gap could significantly boost an advisor's business.

  • Forty-four percent of households have only one account. Opening additional accounts in existing households is another way an advisor can improve his or her business.

Brokerage firms can also help their advisors capitalize on these opportunities by providing comparative pricing information and by investing in tools that help advisors and managers identify opportunities, set objectives, take action and track results.

About PriceMetrix

PriceMetrix is the first choice in practice intelligence solutions for retail brokerages in North America. We help wealth management firms enhance revenue growth, by enabling advisors to identify and action otherwise lost revenue opportunities. By combining industry know-how with powerful aggregated market data, we help our clients increase overall firm profitability.

PriceMetrix directly measures aggregated data representing 3.2 million investors, 500 million transactions, 1 million fee-based accounts, 4 million transactional accounts and over $900 billion in investment assets. PriceMetrix combines its patented process for collecting and classifying data with proprietary measures of revenue, assets, and households to create the most insightful and granular retail wealth management database available today.

Founded in 2000 and headquartered in Toronto, Ontario, we service a notable range of retail wealth management firms within the United States and Canada. To learn about why our clients love us, please visit www.pricemetrix.com or call and email us at 1-866-955-0514 and info@pricemetrix.com.

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