PriceMetrix Inc.



PriceMetrix Inc.

March 12, 2013 08:00 ET

Financial Advisors Increase Assets and Revenues in 2012, According to Annual Report from PriceMetrix; But Challenges Remain in Pricing and Equity Trading Volumes

TORONTO, ONTARIO--(Marketwire - March 12, 2013) - Financial advisors increased production and significantly raised average assets under management in 2012, according to the third annual Report on the State of the Retail Wealth Management from PriceMetrix, the first choice in practice intelligence solutions for retail brokerages in North America. Assets under management grew nine percent in 2012, rising from $74.0 million at the end of 2011 for the average advisor to $80.8 million at the end of 2012. Average annual revenue also grew two percent in 2012, increasing from $537,000 to $550,000.

"Financial advisors made good progress in 2012," commented Doug Trott, President and CEO of PriceMetrix. "Average revenue continued to grow while assets under management not only grew sharply, but also reversed the previous year's decline. Average assets under management are now at a record level."

At the same time, average revenue on assets (RoA) declined three percent in 2012, as revenue growth did not keep pace with asset growth. Financial advisors earned an average RoA of 0.69% in 2012, down from 0.72% in 2011. Further, equity trade volumes also continued to decline. The average advisor completed 346 equity transactions in 2012, down ten percent from 386 in 2011. Average equity principal declined from $8.9 million in 2011 to $7.7 million last year.

"The continued decline in equity trade volume remains a concern across the industry, as it restrains overall revenue growth," noted Mr. Trott. "Reducing the rate of discounting remains a challenge for advisors and their firms, as well as a significant growth opportunity."

PriceMetrix' report is based on the company's aggregated database of seven million retail investors, 500 million transactions and over $3.5 trillion in investment assets. The firm uses a patented process for collecting and classifying data with proprietary measures of revenue, assets and households to create its unique annual report on the retail management industry.

The trend of shifting to fee-based business has continued in 2012, although at a slower pace. The proportion of assets held in fee-based accounts climbed from 26% at the end of 2011 to 28% at the end of 2012. Similarly, fee-based revenue increased from 43% to 45%. The average number of fee accounts per advisor rose from 85 to 92. Still, the average RoA on fee-based accounts declined from 1.14% in 2011 to 1.06%. Part of the drop can be explained by an increase in the number of large households serviced by advisors that typically pay a lower percent amount in fees.

Overall, the data show that advisors are doing a good job actively managing the household composition of their businesses. Advisors reduced the number of households they serve from an average of 165 households in 2011 to 159 last year while focusing on deepening relationships with their largest clients. The average size of households in advisors' books grew in 2012, as did revenue per household. Average household assets increased 13% from $435,000 in 2011 to $491,000 in 2012, while the proportion of households with at least $250,000 rose from 34% to 38%. Average annual household revenue also increased four percent from $3,175 to $3,300. Another important indicator of strong client relationships is the percent of households with retirement accounts, which increased from 69% in 2011 to 70% last year. Since households with retirement accounts produce higher average revenue than non-retirement households ($3,400 compared to $2,400), this is an important shift for advisors and their firms.

"The state of the retail wealth management industry remains robust, as seen by a variety of measures, including the increase in production and assets under management, as well as the continued increase in retirement assets," said Mr. Trott. "Going forward, however, advisors need to continue to increase the value of their service by working with fewer households, deepening client relationships and increasing their capacity to service their remaining clients. Advisors also need to ensure that their pricing reflects their increase in value."

In its report, PriceMetrix identifies three specific areas of unrealized potential for advisors:

  • 39% of households have less than $50,000 in investable assets meaning advisors should either consider dropping households because they are too small or work to increase the amount of investible assets.
  • Advisors have the opportunity to build even deeper relationships with clients as 42% of households have only one account.
  • Advisors need to continue appropriately pricing the value they provide and stop discounting. The average equity trade is priced at a 35% discount meaning advisors are giving up an average of $46,000 in discounts every year.

The third edition of the Insights report on The State of Retail Wealth Management can be found here: http://www.pricemetrix.com/the-state-of-retail-wealth-management-3rd-annual-report/.

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 6 million investors, 500 million transactions, 1.6 million fee-based accounts, 7 million transactional accounts and over $3.5 trillion 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.

PriceMetrix enjoys a highly satisfied user base - 94% of our users would recommend us to others. Founded in 2000 and headquartered in Toronto, Ontario, we service a notable range of retail wealth management firms within the United States and Canada. For more information please visit www.pricemetrix.com or call and email us at 1-866-955-0514 and info@pricemetrix.com.

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