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Advisory Firms to Experience Continued Rapid Growth; Need to Develop Human Capital Greater Now Than Ever Before, Says FPA Study
Posted on: 2005-10-17 14:46:03 Advisory Firms to Experience Continued Rapid Growth; Need to Develop Human Capital Greater Now Than Ever Before, Says FPA Study DENVER, Sept. 19 /PRNewswire-FirstCall/ -- The financial planning profession has and will continue to experience rapid growth, according to the 2005 FPA Compensation and Staffing Study, sponsored by SEI Advisor Network and produced by Moss Adams LLP. The typical financial planning firm has grown from 1.5 employees, including owners/principals in 2001 to 4.5 employees in 2005 and revenues have grown from $631,000 in 2001 to more than $1 million in 2005. Moreover, the 2005 FPA Compensation and Staffing Study suggests continued -- if not rapid -- growth in the size of advisory practices. "Many of these same firms are expected to get to the critical mass threshold in the not too distant future, with more than $5 million in annual revenue and a staff of 20 plus," according to the study. "One driver of this is that as advisers evolve from the solo model and begin adding other professionals, their client, revenue and staff growth becomes exponential." "This year's study shows how advisory practices are changing with the ever-evolving financial services industry," said Elizabeth W. Jetton, CFP(R), chair of FPA. "One of FPA's priorities is career development and growing new planners. This is also one of the biggest opportunities for growing the profession, according to this year's study." And Rebecca Pomering, principal of Moss Adams LLP, said: "The ability to recruit and retain talent will define the successful advisory firms in the next five years. The firms that show the ability to grow new advisors and provide a career track to their staff will continue to grow at a high pace and enjoy financially and professionally rewarding practices." Other highlights from the study: -- Growth in revenue and scale has led to increasing specialization of roles and responsibilities within firms. Job descriptions for employees are being better defined, the combined skill-sets of firms are increasing and pay practices are becoming more sophisticated. -- Competitive compensation practices reflect the high demand for experienced staff, especially professionals (i.e., non-owners in client-focused advisory positions). Close to half of the participating firms are looking to recruit new professionals, nearly double the percent of firms that were looking to recruit professionals in the 2003 FPA Compensation and Staffing Study. With increased firm sizes, professional management positions are also becoming more common and are in higher demand. -- Once advisory firms cross the $1 million level they start displaying significant leverage with the number of non-owner professionals and support staff quickly increasing. Firms that exceed $2 million in revenue also start employing professional management. The compensation for all advisory levels reflects an increasing use of incentive compensation to align the compensation of advisers with the strategy of the firm and to create upside in the compensation. -- Owner compensation (profit distributions from ownership excluded) represented 23 percent of the revenue of the average advisory firm participating in the study and continued to be the single largest expense for the firm. Second was employee professional compensation at 16 percent. -- Independent financial advisory firms are tremendously successful in creating and sustaining client relationships. Firms must now aim to achieve similar success in the attraction, selection and retention of talent. Human capital development and growth are inseparable for advisory firms. For the industry to continue to grow, firms must give equal focus to both clients and staff. "In this era of transition within the wealth management industry, advisers' success will live or die by the quality of client experience they provide. To create that experience, it's crucial that advisers integrate a scalable business model with the right staffing strategy," said Jack May, Solutions Leader, SEI Advisor Network. In an effort to help financial planning professionals address compensation and staffing issues, the executive summary of the study will be published in the November/December issue of Solutions magazine. In addition, that issue will highlight the advisory practices of firms that have excelled in some aspect of compensation and staffing, including recruitment and retention. FPA also plans to hold several Virtual Learning Center seminars in the coming months designed to help financial planning professionals address staffing and compensation issues: -- Protect Your Practice When Adding New Partners by Thomas D. Giachetti, Esq. on Oct. 12, 2005 -- Trends in Financial Planning Staffing and Compensation by Rebecca Pomering on Nov. 9, 2005 -- Recruiting & Retention - Best Practices by Jeff Rattiner on Jan. 11, 2006. The study is available in both hard copy and electronic (PDF) format and retails for $195/$185, but FPA members pay just $95/$85 (hard copy/electronic). To purchase a copy, please visit http://www.fpanet.org/products or call 800.322.4237. Bulk purchase discounts are also available to financial planning institutions and CFP(R) registered programs. About the Financial Planning Association(R) (FPA(R)) The Financial Planning Association (FPA) is the membership organization for the financial planning community. Its members are dedicated to supporting the financial planning process in order to help people achieve their goals and dreams. FPA believes that everyone needs objective advice to make smart financial decisions and that when seeking the advice of a financial planner, the planner should be a CFP(R) professional. For more information, visit http://www.fpanet.org. About SEI Advisor Network SEI Advisor Network provides independent advisors with outsourced wealth management platforms that are designed to meet the demands of a new generation of wealthy clients. In an evolving wealth management industry, the group offers an end-to-end process for successfully transforming their clients' businesses in every critical area, including marketing, practice management, investment strategy and client relationship platforms. The SEI Advisor Network is a strategic business unit of SEI Investments. For more information, visit http://www.SEIAdvisorNetwork.com. About SEI SEI Investments (Nasdaq: SEIC) is a leading global provider of asset management and investment technology solutions. The company's innovative solutions help corporations, financial institutions, financial advisors, and affluent families create and manage wealth. As of the period ending June 30, 2005, through our subsidiaries and partnerships in which we have a significant interest, SEI administers $312.0 billion in mutual fund and pooled assets, manages $130.7 billion in assets, and operates 22 offices in 12 countries. For more information, visit http://www.seic.com. About Moss Adams LLP Moss Adams LLP is the 11th largest accounting and consulting firm in the United States, and the anchor firm in Moores Rowland International, an association of 140 leading independent accounting firms worldwide. Moss Adams has a specialized team providing business continuation and practice management services to independent financial professionals. With a strong understanding of the unique issues facing financial professionals in today's business environment, Moss Adams has the expertise and the experience to provide unequaled comprehensive accounting and business consulting services including: -- Tax and Assurance Services -- Practice Management -- Succession and Exit Planning -- Strategic and Business Planning -- Investment Banking for Mergers and Acquisitions -- AIMR Verification and Performance Benchmarking -- Valuation -- Compensation and Organizational Design -- Due Diligence Moss Adams has provided accounting, tax, consulting, and valuation services to hundreds of financial planners, investment management, and consulting firms, independent trust companies, independent broker-dealer firms, and other financial services organizations throughout the United States, Canada, and Australia. For more information, visit http://www.mossadams.com/industries/sin/default.htm. The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association. CFP(R), CERTIFIED FINANCIAL PLANNER(TM) and the federally registered CFP (with flame logo) are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete CFP Board's initial and ongoing certification requirements. SOURCE Financial Planning Association Web Site: http://www.fpanet.org/products http://www.fpanet.org Homepage For personal help planning for your retirement http://www.retirement-plan.us For web information about planning your retirement. http://www.retirement-retirement.com/category-20.php |