Advisors hustled to hang onto clients last year: Fidelity


With the market dropping precipitously in 2022, registered investment advisors spent much of last year fighting to hold onto clients and soothe their anxieties.

The S&P 500 stock index posted a total return last year of of negative 18% last year, eroding the annual organic growth of client assets both at RIAs with less than $1 billion in client assets and their larger counterparts, or those with $1 billion or more in assets under management, according to a new report, the 2023 Fidelity RIA Benchmarking Study.

With the stock market falling in 2022, financial advisors were also busy trying to please clients by adding on services, according to RIA executives.

“We saw advisors focus specifically on retaining clients in 2022, likely a result of more reactive engagements that were driven by market volatility,” Anand Sekhar, vice president of practice management and consulting at Fidelity Institutional, the RIA custody arm of Fidelity Investments, wrote in an email.

According to the report, RIAs with less than $1 billion in AUM posted organic growth rates of 3.2% last year compared to 8.2% in 2021. Likewise, the larger RIAs with $1 billion or more reported organic growth of 3.6% last year versus 8.4% a year earlier.

“So, rather than engaging with clients on topics and goals that might be considered higher value and lead to share of wallet gains — holistic financial planning, family engagement and generational wealth transfer, etc. — advisors instead spent time protecting their core client base and helping clients understand the state of the market,” Sekhar said.

Financial advisors and RIAs have said for years they intend to hire and train staff, but that may be easier said than done in such a competitive environment.

“Most RIAs are at physical capacity limits, meaning there are only so many client relationships one person can manage and also go after new business,” said Mark Tibergien, who retired as CEO of Pershing Advisor Solutions in 2020 and is now a management consultant. “If those firms haven’t hired staff, that’s a constraint to bringing on new business and clients.”

“In general, 2022 was not a consistently up year, and for the average financial advisor, gross revenue was not as high as it had been,” said Jodie Papike, CEO and managing principal of Cross Search, a recruiting firm. “But I don’t think it was enough of a slump in 2022 that they were overly worried about it. It wasn’t catastrophic, like the 2008 financial crisis or the crash of 2000.

“The conversation of the economy being in a recession has led to advisors not feeling stable for quite a while,” Papike added. “They’re trying to ride it out.”

Fidelity conducted the survey online from April 17 through July 4, using a third-party research firm. A total of 245 RIAs and 3,537 advisors participated in the study.

Meanwhile, many firms, especially larger ones, continued to discount fees, adding to revenue yield compression, according to Fidelity.

“Firms continue to offer discounts and bundled offerings, but the really important factor here is that they are also providing more services than ever before for roughly the same fees,” Sekhar said.

“To promote profitability, leaders can take a closer look at household data to rethink offerings and pricing based on a segmentation strategy, and that also leads into the final point,” he noted. “Outsourcing. Remember, advisors are no longer just stock pickers.”

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