June 8, 2010
WEALTH ADVISER: Facing The Competition--Whatever It May Be
By: Charles Passy
In most industries, it's easy for a company to identify the competition. Coca-Cola keeps its eye on Pepsi. McDonald's never loses sight of the (Burger) King.
In the financial advisory field, "competition" is proving much harder to peg of late.
Advisers do compete with one another for clients. But in an ever-turbulent period for financial markets, advisers say their truest adversary is client fear: Prospective and established investors are often too scared to make a move, so they opt to avoid planning altogether.
Even investors who are willing to take the plunge often go the do-it-yourself route, encouraged by the advice of TV talking heads--think Suze Orman or Jim Cramer--or they listen to a friend or family member who claims to be a financial "whiz."
Advisers face "a lot of competing factions," says Tim Minard, senior vice president of retirement distribution at The Principal Financial Group, which recently conducted a survey of 650 advisors throughout the country.
The Principal study, which was released today, showed that 35% of advisers pegged "client fear" as their biggest competition. Another 13% identified advice from TV financial personalities and another 12% advice from friends and family members as the key threats to their practices. Only 27% saw their main competition as other advisers.
In other words, the future of the advisory business may not shape up to be a battle between one big brokerage firm and another, or between wirehouse brokers and independent advisers. It's a battle fought on many fields, while "the consumer is bouncing around" from one financial planning option to another, says Minard.