Advisors can prevail and prosper despite the strong headwinds facing the financial advisory industry, according to a new study released today by management consulting firm McKinsey & Co. and LIMRA, an industry-funded research group.
The study found that the most productive advisors are those that utilize best practices, such as teaming, client specialization, retirement planning, and knowledge of life events. Advisors who team up regularly with other advisors have the potential to increase their individual annual production by 15%, according to the findings. Those that target specific client segments can boost their annual productivity by 13%, while those that create formal retirement plans for their clients and increase their knowledge of client life events can increase productivity by 5% and 3.5%, respectively. Employing all four best practices can increase advisor productivity by more than 30%, according to the study.
Another finding is that advisors are selling a larger share of investments and advisory services relative to insurance. For example, investment products account for 80% of revenues for investment-focused advisors, up from 75% in 2004.
In terms of serving advisors, financial services organizations have plenty of room for improvement. While financial services firms have increased the services they offer advisors by 40% over the last 10 years, many of these services are not valued or are poorly delivered, the study found. In particular, in-person sales support and marketing services are not valued by many of the advisors who receive them. “Organizations should evaluate how to better tailor their services to advisors’ specific needs,” LIMRA said in a press release.
Insurance companies especially need to up their game as advisors reduce the number of insurance carriers they do business with. The study found that advisors place approximately half of their insurance with their top carrier and that they frequently switch insurance providers, due primarily to non-competitive products, concerns about carrier stability, or poor service.
The study, conducted in the spring and summer of 2012, canvassed nearly 2,000 financial advisors with more than three years of experience across multiple distribution channels, including banks, broker-dealers, and insurance companies.