With Broker and Advisor Sentiment Back to Pre-Crisis Levels, Fidelity® Study Looks Ahead to the Future of Advice

Gen X/Y, Female, Teamed and Fee-Based Advisors Poised for Growth

BOSTON -- Fidelity Investments® today unveiled the results of its 6th Broker and Advisor Sentiment Index study*, which found that overall sentiment1 is at its highest level since the financial crisis -- 7.6 on a range of zero to 10. In addition, the study found that Gen X/Y advisors, female advisors, advisors working in teams and those who earned more compensation from fees than from commissions (“fee-based”) typically had higher assets under management (AUM) compared to their peers, making these segments likely to drive the future of the advice business.

Average Assets Under Management by Advisor Segment


There have been notable changes in the top drivers of sentiment since the last survey was conducted in 2010, with brokers and advisors more focused on developing professionally and growing their practices. In this year’s study, brokers and advisors were taking action to generate new business, and were placing greater importance on compensation, developing professionally and receiving marketing support. This comes at a time when average compensation and assets under management (AUM) were the highest in the study’s history at approximately $236,000 and $56 million respectively.

“Four years after the financial crisis, brokers and advisors are back in ‘growth mode’ – focused on developing themselves professionally and expanding their practices,” said Sanjiv Mirchandani, president, National Financial®, a Fidelity Investments company. “By recognizing these shifts in sentiment, as well as key segments poised for growth, firm leaders can help to ensure they are meeting the needs of today’s brokers and advisors, while also positioning their firms for future success.”

The Future of Advice
While today’s advisors are primarily male, likely to work on their own (“soloists”) and commission-based, industry and demographic data from the study indicated that a new advisor profile may be emerging:

Gen X/Y Takes on Industry Leadership -- Today’s advisor is, on average, 46 years old with Gen X/Y now representing more than half of the industry.
Female Advisors: Generally Successful but Still a Minority -- The profession continues to be male-dominated, with men representing 87 percent of respondents and women representing 13 percent. While women are currently significantly under-represented in the advisory space overall, more women have been entering the field. Female advisors who have fewer than five years of experience have increased by 40 percent since 2010.
“Soloists” Dominated but Team Players Have Been Far More Profitable -- Most advisors work alone (52 percent) versus as a team (13 percent), while the remainder did a combination of both, depending on the client. “Teaming” may increase as firms recognize its relative success in terms of compensation and AUM.
Continued Migration Toward Fee-Based Compensation -- The majority of advisors’ current compensation comes from commissions2. However, the study found that advisors would like to see their compensation structure shift toward more fee-based business -- a trend since 2007.

“Aligning growth strategies to reflect these key segments and advice models may help drive profitability for brokers, advisors and their firms -- and importantly, it may help them better serve their clients,” said Michael R. Durbin, president, Fidelity Institutional Wealth Services®, a leading custodian for registered investment advisor (RIA) firms. “With investor demographics and needs constantly shifting, it is critical for firm leaders to consider how their talent strategies and advice models align with those shifts.”

Fidelity took a closer look at Gen X/Y advisors, female advisors, advisors working in teams and those who are predominantly fee-based to determine what drives them, how they’ve been successful and what these shifting demographics may mean for the future of the advice business.

Gen X/Y Takes on Industry Leadership
Despite industry concerns about the graying of advisors, this year’s study found more advisors are now Gen X/Y (57 percent) than Boomers and Seniors (43 percent). In addition, more young people have been joining the profession with the percentage of advisors who have been in the field less than five years more than doubling since the 2010 study. While Gen X/Y advisors were more successful in terms of their AUM, they are generally less satisfied overall, specifically with their firms and books of business -- possibly because these younger advisors were still concerned with growing their practices.

Key Considerations for Broker and Advisor Firm Leaders
Engage with Gen X/Y to discuss growth strategies for their business. Gen X/Y advisors want to attract more and higher-net-worth clients, yet were not that satisfied with the marketing support they received.
Fine-tune professional development. This segment also values professional development programs. There are a wide variety of topics that may help them improve their skills and operate more efficiently, including discussions about effective time management, improving client satisfaction and the latest financial trends.

Female Advisors: Generally Successful But Still a Minority
Women have been proving their success as advisors. Female advisors had 5 percent higher AUM and were generally more satisfied than their male counterparts. While both genders were adjusting their strategies in the past year to focus on gaining new clients and increasing their share of wallet, women were networking to generate new business more than their male counterparts by attending events and seminars. With more women entering the advisory field and women projected to account for 60 percent of all college graduates by 20193, women are likely to become a stronger force in the industry.

Key Considerations for Broker and Advisor Firm Leaders
Consider putting a plan in place to recruit more women to your firm. In other studies4, women in financial services cited a number of factors they considered to be barriers to advancement, including a lack of mentors, personal/family commitments, exclusion from informal networks of communication and a lack of women role models. Consider how your firm can demonstrate its commitment to addressing these barriers to present a female-friendly environment that values personal performance regardless of gender. This may be important for registered investment advisor (RIA) firms and independent broker-dealers, the channels with the smallest percentage of women to date (both at 9 percent).

“Soloists” Dominated but Team Players Have Been Far More Profitable
According to the study, most advisors worked alone (52 percent) versus as a team (13 percent), while more than a third (35 percent) did both. Teamed advisors were generally more successful, making 32 percent more in compensation. However, they had slightly lower sentiment, possibly a result of their need to make trade-offs as part of a team. Teamed advisors were taking more action than soloists -- and, in some cases, very bold steps; for example, they were twice as likely to ask less profitable clients to leave. When it comes to new business strategies, teamed advisors were more active networkers; they were more likely to attend networking events, participate in professional associations and target specific industries.

Key Considerations for Broker and Advisor Firm Leaders
Encourage the formation of more teams. Teams can enable more senior advisors to focus on client development while providing the opportunity for those who are less experienced to learn more about the business, how to effectively interact with clients, and how to build their network.
• In addition, teaming may be an effective solution for succession planning and help with business continuity as older advisors begin to retire.

Continued Migration Toward Fee-Based Compensation
More than half of brokers and advisors (52 percent) were predominantly commission-based5 while one-third (33 percent) were predominantly fee-based. However, their compensation structures have trended toward greater fee-based compensation since 2007. Fee-based advisors had 31 percent higher AUM and made 44 percent more than those who were predominately commission-based. In general, fee-based advisors were more satisfied overall and with their firms and their books of business.

Key Considerations for Broker and Advisor Firm Leaders
Support the move to fee-based compensation. Advisors have expressed a desire to build up their fee-based business, especially teamed and Gen X/Y advisors. Consider providing tools that can help advisors evaluate their current book and compensation structure, plan for the transition and realistically understand the time and effort required.

Additional Insights on Advice
The Broker and Advisor Sentiment Index is the second study in Fidelity’s annual “Insights on Advice” series, and as part of this year’s series, Fidelity has launched an interactive website with insights and resources from the study that can help financial advisors serve their clients better.

*About the Fidelity and Broker Advisor Sentiment Index
The 2012 Fidelity® Broker and Advisor Sentiment IndexSM was fielded through an online survey during the period of March 15–29, 2012. Participants included 1,207 advisors from across multiple firm types who work primarily with individual investors and manage a minimum of $10 million in assets under management. Firm types included a mix of large and small independent broker-dealers (IBDs), regional broker-dealers, banks, wirehouses, insurance companies, and registered investment advisor (RIA) firms, with findings weighted to reflect industry composition.

Bellomy Research, an independent third-party research firm, conducted the study. The data reflect a margin of error of +/–3%.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of $1.6 trillion, as of August 31, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

1) A composite metric that measure U.S. brokers’ and advisors’ satisfaction with the support received from their firms in the areas of running their practices, growing their businesses, professional development, and the balance between their work and life, as well as other interests.
2) Average compensation breakdown among total advisors: commission—50 percent, salary—10 percent, asset-based fees—37 percent, other compensation—4 percent
3) U.S. Bureau of Labor Statistics, “Women in the Labor Force: A Databook.” December 2011
4) Women in Financial Services: “The Word on the Street,” Catalyst, 2001.
5) “Commission-based” means that the brokers and advisors in this group earned more compensation through commission-based assets than fee-based assets. This opposite is true for “fee-based.”

The content provided herein is general in nature and is for informational purposes only. This information is not individualized and is not intended to serve as the primary or sole basis for your decisions as there may be other factors you should consider. Fidelity Investments does not provide advice of any kind. You should conduct your own due diligence and analysis based on your specific needs.

National Financial is a division of National Financial Services LLC. Fidelity Institutional Wealth Services is a division of Fidelity Brokerage Services LLC.

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