Practical advice to help wealth managers build their firms

By Stewart Bowling, Courtney Hoff Dockerty

December 5, 2023 8:32 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In an era of increased competition, wealth management firms are often looking for ways to stand out from and above their peers, as well as improve their own financial standing.

Tax services, one of the areas in which financial advisors can generate the most alpha, rise to the top of the list for many firms. Still others focus on upgrading recruiting and retention of top young talent, and reconsidering their fees and fee structures.

More about these, and other stories, can be found below from recent coverage in Financial Planning.

Client tax requirements are evolving, and firms need to keep up

Tax planning is at the top of the list of services clients want from their advisors, but wealth management firms are not keeping up, according to a survey by Herbers & Company.

While 73% of advisory practices say they provide advice on tax matters, the growing demand from clients with increasingly complicated finances makes tax planning services a key offering, particularly when it comes to client retention.

"As someone's wealth grows, as their complexity increases, that's really an area where we want to be helpful to our clients," said Suzanne van Staveren of Edelman Financial Engines. "Clients stay with us for the long term ... so we want to make sure that we can continue to service them."

Read more:

Advisory practices aren't meeting clients' tax demands, study finds

Thai fans Beg Taylor Swift to Make Up for 2014 Post-Coup Cancellation

Suzanne Cordeiro/AFP/Getty Images

Lessons in strategy abound in a surprising teacher — Taylor Swift

With 12 Grammys, 100 million monthly listeners on Spotify and an estimated $2.2 billion in North American ticket sales for her current Eras tour, there's much to admire about Taylor Swift, whether you're a fan, a wealth manager or both.

"While there is still much of her story left to be written, it is clear that one of her greatest contributions will be empowering creative control for the next generation," said Tyler Martin, director of financial planning for registered investment advisor Stonebridge Wealth Management.

Beyond taking creative control, there are many other lessons financial planners can learn from the global pop sensation. Here are six takeaways from Swift's career to help advisors drive their businesses.

Read more:

What wealth managers can learn from Taylor Swift

Wine bottle of wine, flowers on a cruise ship.

Good pay becomes ‘table stakes’ for hiring top talent

Survival of the fittest is creating a shortage of talent in wealth management, with nearly three-quarters of those entering the profession dropping out within three years, according to a study by Cerulli Associates.

Competition for the fledgling advisors who remain is fierce, and recruitment has become a significant challenge as firms look to stand out from the crowd.

Here are the perspectives of a variety of industry professionals on what it takes to recruit and retain the best talent.

Read more:

How to woo advisor talent in a tough labor market

New research uncovers the key to revenue success

Working longer hours, having years of experience, doing business in a more favorable market — there are lots of pat answers for why one advisor generates more revenue than another. Research by LPL Financial, however, brings data to the table.

For example, the top 10% of LPL advisors on average bring in around $3 million annually for their practices compared to $1 million for the other 90%. Yet these same top advisors work only two hours more per week (49 vs. 47) than their peers.

Perhaps the most important element among several for this superior performance? Working smarter, not harder, said Joe Lanser, senior vice president of business solutions at LPL.

Read more:

LPL study: How advisors can triple revenue from $1M to $3M

Higher fees go against the grain but may increase profits

Concerns that higher fees lead to lower sales may not bear out the axiom it is thought to be, according to a research paper co-authored by David Lincoln, co-founder and partner at consulting firm WISE.

"For every $1 billion in assets, a single basis point improvement in realized fees represents $100,000 in recurring fee revenue for years," said the report. "Taking discounts and other exceptions into account, high-fee firms realize at least 10 to 25 basis points more than competitors with a lower starting fee."

Leveraging data from more than 150 firms and 200,000-plus+ accounts, the report suggests that the counter-intuitive move of charging higher fees and offering fewer discounts and less exception pricing could boost revenue significantly for the 80% of firms that only charge "market middle" fees.

Read more:

This simple move could be worth millions for wealth management firms