David R. Evanson

The Career Advisor, Summer, 2004

In early April, broker-dealer giant LPL and the Career Adviser paired up for an unusual survey: We prepared a questionnaire covering key practice management issues, and LPL sent it via e-mail to the firm’s entire network of reps. About 320 took the time to answer out questions, giving us quite a bit to think about and more than a few surprises.
The questions were all multiple choice, but we also gave reps a chance to comment anonymously on any of the topics, and these frank remarks were just as revealing as the numerical answers.

In the coming months we’ll be delving into some of the issues raised by the survey, and our parent publication, Financial Planning, will also be covering some of the results as well. Immediately below are some of the issues that jumped right out at us on fees, success factors and mode of compensation. Below that is a tabulation of the results for each question.

Advisers on Fees . . .

Some of the answers were predictable. For instance, approximately than 63% of the respondents felt that in within five years they would be getting at least 75% of their income from fees, not commissions.

“Fees cure regulatory ills surrounding commissions and set us apart from the peddlers,” said one respondent to the survey. Others felt that forces larger than themselves were moving them in the fee direction, “The industry is moving in this direction and my broker-dealer is moving me in this direction, which is okay with me. However, it’s beginning to be inefficient to work with smaller accounts/relationships. What happens to the ‘small’ or ‘just beginning’ investor?”

Most of the financial planners who responded felt that the shift toward fees was in the best long term interest of their clients as well as their practice. “Work smarter, not harder,” said one adviser. “Fee accounts are so much easier to manage. I can do more for the client and spend less time doing it.”

Advisers on Success . . .

Some answers were surprising however. For instance, less than 1% of respondents identified intelligence as the most critical personality trait for success in the financial planning business. Instead, a service mentality, determination and strong ethics were most often cited as the base personality traits, accounting for 82.2% of success in the business according to financial planners. Apparently, brains just don’t cut it anymore. “Clients arenzzt impressed with a presentation of your intellect,” said one adviser. “They went to you because of your assumed expertise. What they really want is someone who understands their fears and addresses them with workable solutions.”

Advisers on Financial Planning . . .

And finally some responses were just plain old food for thought.

For instance, while 45.6% thought that the financial planning profession was in a state of flux, 44.6% thought that financial planning was leading a renaissance in financial services or still in its infancy. Some darker sentiments included this comment: “The industry today exists primarily because of numerous companies supporting mediocre products via expensive distribution systems. Clients work with advisers who have specific products they must sell … because no one has told them differently. Eventually, companies will abandon the old model and their products will improve and be offered via independent channels. The biggest problem facing the future is the masses of investors in the lower and middle ranges who desperately need excellent advice, but whose relationships as clients are not valuable enough to get the best adviserzzs help.”

Advisers with a more sanguine outlook had different ideas about the current state of financial planning. “In reality,” said one adviser, “Our industry has been evolving for the past 30-40 years and it will continue to evolve. Surviving and succeeding requires one to be innovative or else face extinction.”

And Finally . . .

Fully 40.8% of those who responded to our survey wanted to read more about practice management issues. Since practice management is the raison d’etre of Career Adviser, we’ll take this as a nod to keep doing what we’ve always done.

Financial Planning Magazine’s 2004 Survey of LPL Financial Advisers

1. How much time do you spend marketing yourself?

* less than 1 hour a week: 24.4%
* 1-3 hours a week: 41.8%
* 4-6 hours a week: 13.6%
* more than 6 hours a week: 20.3%

2. What would you MOST like to do?

* increase the number of clients you have: 37.3%
* keep the number of clients the same, but increase revenues by gradually focusing on higher net worth clients: 47.2%
* decrease the number of clients and keep revenue the same by gradually focusing on higher net worth clients: 15.5%

3. Five years from now, you will MOST likely be getting

* 90% or more of your income from fees: 31.3%
* 75% to 89% of your income from fees: 32.3%
* 50% to 74% of your income from fees: 25.3%
* Less than half your income from fees: 11.1%

4. Where do you do MOST of your work?

* Your home: 12.0%
* Rented executive suite: 18.7%
* Rented rooms in an office building: 47.2%
* In a building you own: 14.6%
* Other: 7.6%

5. What do you plan to do at retirement?

* sell firm to another planner: 46.2%
* sell firm to one or more employees: 15.8%
* sell firm to own child: 16.1%
* don’t think I can sell it: 3.2%
* other: 18.7%

6. What is the minimum investable assets a consumer must have to become a client?

* no minimum: 39.2%
* $10,000 or less: 3.8%
* $11,000 – $25,000: 2.8%
* $26,000 – $50,000: 12.0%
* Over $50,000: 42.1%

7. What kinds of articles would you MOST like to see more of in professional publications?

* investment strategies (e.g., sector investing, using REITs, using ETFs): 22.2%
* practice management (e.g., marketing/PR, getting more clients, managing your office): 40.8%
* client strategies (e.g., IRA issues, tax management, advanced insurance topics): 37.7%

8. Do you believe the financial planning profession is getting:

* more competitive: 86.4%
* less competitive: 13.6%

9. If you believe the profession is getting more competitive, which of the following is the PRIMARY reason why:

* prolonged downturn in markets have placed a premium on advice: 48.8%
* proliferation of products have confused investors: 25.6%
* scandal has caused investors to seek out a trusting relationship: 23.3%
* more prospects are nearing retirement age: 2.3%
* younger baby boomers believe they will not have social security benefits: o%

10. If you believe the profession is getting less competitive, which of the following is the PRIMARY reason why:

* upturn in markets have made a do-it-yourself approach more popular again: 2.6%
* major securities firms have emphasized financial planning over stock brokerage: 10.6%
* the continued blurring of lines among all financial services firms: 73.6%
* corporate scandals have shaken the faith of clients and prospects: 6.6%
* there is more scrutiny of fees by customers and regulators: 6.6%

11. The single MOST important personality trait for success in financial planning is:

* a service mentality: 31.6%
* determination: 21.8%
* patience: 3.2%
* intelligence: 0.9%
* empathy: 4.7%
* friendliness: 1.6%
* luck: 0.3%
* strong ethics: 28.8%
* wisdom: 5.1%
* candor: 1.9%

12. When history looks back at this point in time how will it characterize the financial planning business?

* leading a renaissance in financial services: 26.9%
* in a state of flux as a result of competing market forces: 45.6%
* in its optimal state: 2.2%
* in its infancy: 17.7%
* a case study of how minimal regulation leads to innovation and better service: 7.6%