Vanessa Oligino of TD Ameritrade.
Advisors should continue to seek out growth and other opportunities during turbulent times such as the COVID-19 pandemic we are experiencing now and not just rest on their laurels, according to TD Ameritrade.
That is a message that came through loud and clear during the Great Recession of 2008 and 2009, when standout advisors who continued to grow and expand their teams managed to thrive, even if it meant taking a hit on profitability on a short-term basis to take advantage of new opportunities, Dan Inveen, senior consultant at TD Ameritrade Institutional, said Wednesday during the webcast "Finding Opportunity in Turbulent Times."
The Great Recession was "really a story of two different types of firms," he said: the majority, who just focused on getting through those challenging times and made little effort to grow, and those who "never lost sight of pursuing opportunity."
The standout advisors wound up more than doubling what the others achieved in both four-year revenue growth and 2011 operating profit, he noted, referring to 2008-2011 data from TD Ameritrade's FA Insight Annual Study of Advisory Firms.
Those standout firms also consistently attracted new clients to their firms before and after the recession and never wavered from their focus on growth despite the challenges they faced, he said.
While the standout advisory firms achieved a client growth rate of 5% in 2009, all other advisors achieved only a 0.6% client growth rate, he noted. From 2008 to 2011, standout firms saw an 11% average annual growth in new clients compared with only a 0.4% increase seen by other firms, according to TD Ameritrade.
The standout firms also kept a close eye on expenses and overhead, according to the company. For standouts, median overhead expense margins dropped from 45% to 42% from 2008 to 2009, while other firms saw them widen to 56%, up from 46%. Standout owners also took deep pay cuts, reducing their share of total firm revenue from 31% down to 19%, while owner pay at other firms hovered around 25% of total revenue.
Standout advisory firms, meanwhile, invested selectively to improve their capacity, according to the company. While investments during the Great Recession may have decreased productivity for those standout firms initially, these firms were better positioned for growth in the years that followed, according to the firm. In 2011, revenues per revenue generator at standout firms were 22% greater than in 2008, while productivity at other firms slid 10%.
