RIP Organic Growth

Your 2020 Game Plan is Net New Assets

Steve Gresham
November 12, 2019

Financial updates from several large firms reveal the reality facing the advice industry - a lack of organic growth. Recruiting success and historic market performance of both stocks and bonds are masking significant weakness in net new assets. Time for a reality check - and to get prepared!


Growth Busters


Three factors require your attention now - to better understand their influence and how to use them to shape your action plans:


1. The Markets


The Buoyant Bull is more than 10 years old. The trailing 12 on the S&P 500 at October 31 was over 14%. And check out the Barclay’s Agg - 11%! About the only numbers down in the last year are brokerage rates and AUM fees. Remember the old saw, “Don’t confuse bull markets and brains”? That’s a lot of rising tide lifting your boat. The bull trade may linger, but should you bet your business plan?


2. The Demographic


If you’re tired of hearing about aging Baby Boomers, best you get over it since they are not only not going away any time soon. Tiburon Strategic Advisors estimates the Boomers represent 81% of advice industry profits through 2035. But note the implications - the median age today at 63 will be rising steadily to 79. A very different business from 2009 when the median was 53. Savers and investors are pretty low maintenance. By comparison, pre-retirees need planning, retirees tend to consolidate, older retirees need help managing limited resources and may lose their confidence and ability. These realities are growing more important every day and beginning to show up as asset attrition at less attentive firms. The typical Boomer household has 5-6 financial providers and that number tends to decline as they age. Who will lose?


3. Fear


Combine a mature market with a mature clientele and you get the fear of significant losses impacting retirement. The Boomers all saw the damage done in the 2000-01 Tech Wreck and the 2008-09 Financial Crisis. The possibility of a 25-50% hit is a very real fear among investors who don’t think about living 30 years in retirement. At the Envestnet Advisor Summit earlier this year I heard data guru Frank Coates share how investors have been selling steadily since the December 2018 correction. Fear is real - be alert for it among your clients.