Digital tools, tighter focus and robo advisor options may be making financial advisors more productive -- but an aging client base presents the industry with a big problem, according to a new report.

"Advisors are working with fewer clients and becoming more productive," says Pat Kennedy, author of PriceMetrix' annual State of Retail Wealth Managementindustry report.

One key indicator of productivity gains: Revenue grew faster than assets for the average advisor last year, according to the report.

"That's a real positive for the industry and a sign of increased productivity," says Kennedy, co-founder of PriceMetrix, the Toronto-based practice management software and research firm. "It means as advisors are growing their practice, retention levels are increasing, relationships are deepening and advisors are charging more and offering more services."


One thing helping advisors focus, Kennedy says: "There are now more options for the smaller client, including robo advisors.

"Advisors can concentrate on working with larger clients with more assets and service needs," he continues. "It's now easier to outplace clients with fewer assets and needs -- and advisors are not losing clients they don't want to lose."

"If the only restaurant in town is a steakhouse and a McDonald's opens up, the steakhouse can reposition its business and boost its revenue per customer," Kennedy adds.

Using PriceMetrix' database of more than 40,000 advisors, the report found that the average number of clients in an advisor’s book fell to 150 in 2014, down from 156 in 2013. At the same time, average client assets increased to $628,000 from $562,000. Since 2011, the number of clients served by advisors has dropped 10%.


There was other good news for advisors in the report: Average advisor assets and revenue both hit record highs -- at $97 million and $655,000, respectively.

Advisors also increased their percentage of fee-based business -- with percentage of fee-based assets in the average advisor’s book at 35% in 2014, up from 31% in 2013 -- at the same time that fee-based pricing improved, rising to 1.02% on assets last year from 0.99% in 2013.

That was the first increase in several years, and may have contributed to an increase in the percentage of fee revenue, which was at 53% in 2014, up from 47% the previous year.

But the report also had some bad news: The average client age is now nearly 62, and increasing by roughly six to seven months per year. Only 23% of advisor's clients are currently under 45, a level that hasn't changed in five years.

"The math is clear: If the trend doesn't change, the average client age will be 70 years old in 14 years," Kennedy says.


One firm executive offers a counterargument, noting that longevity has grown along with client age.

Although the average age of Boston-based Colony Group's clients has indeed increased, says chairman and CEO Michael Nathanson, "people are living longer than ever before and also working -- and therefore generating additional income and assets at increasingly advanced ages.

"Wealth managers who specialize in intergenerational planning should see client aging less as a threat and more as an opportunity to demonstrate additional value and secure the next generation of clients," Nathanson adds.

Kennedy offers one caution to advisors who have been focusing on millennials to broaden their clientele. They'd be better off trying to attract Gen X, whose members are in their their 40s and early 50s, he suggests.

"Every time you open the trade press you'll see a story about millennials," he says. "But people who are dying are leaving money to Gen Xers, who are also in their peak earning years. This is a market advisors shouldn't be ignoring."

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