Schwab Institutional Reports Identify Pricing for Profitability, Talent Retention as Critical Business Issues for Advisory Firms
September 26 2005 - 1:00PM
PR Newswire (US)
SEATTLE, Sept. 26 /PRNewswire/ -- According to two new research
reports from Schwab Institutional, two business management issues
have emerged as definitive drivers for advisory firm success in
today's increasingly competitive market place: effective pricing
and talent retention. Two new Schwab Market Knowledge Tools(TM)
(MKT) reports examine these mission-critical issues in detail.
Pricing Strategies for Maximum Success The just-released Pricing
Strategies for Maximum Success white paper developed by Schwab
Institutional and Moss Adams LLP guides advisors though the process
of designing and implementing optimal pricing strategies. The
report finds that despite the importance of pricing to advisor
businesses, most fee-based independent advisory firms do not
analyze their pricing when establishing fees for new clients or
considering changes to their current pricing model. Citing pricing
as a complex issue that requires careful evaluation of both a
firm's cost basis and the competitive landscape, the report points
to cost analysis as a vital and ongoing process for determining
profitability of existing relationships and properly pricing future
relationships. Among the highlights of the report: -- The top 10%
of firms (in terms of profitability) strictly adhere to a minimum
fee requirement. -- While the average advisory firm spends 42% of
its revenue on professional compensation, only 16.4% of firms track
how their professionals allocate their time. -- Professionals at
every level within a firm typically spend at least 30% of their
time on non-client activities. The report outlines four steps for
implementing a practical pricing strategy: -- Track the time each
professional spends servicing each client. -- Compare
cost-of-service to revenue generated. -- Look for large-scale
patterns that suggest the need for firm-wide repricing. -- Adjust
sub-optimal clients before adjusting pricing across the firm and
consider options such as AUM (assets under management) fees,
retainers, project fees and hourly billing. The report works in
tandem with an Excel-based pricing tool that gives advisors access
to the formulas discussed in the report. Best-Managed Firms:
Recruiting and Retaining Top Talent According to another new MKT
report from Schwab Institutional titled Best- Managed Firms:
Recruiting and Retaining Top Talent, human capital management is
the number one priority for the most successful firms in the
industry. The report was compiled from interviews with the 27
"Best-Managed Firms." The best firms were selected from the
participants in the 2005 FPA Compensation and Staffing Study
conducted by Moss Adams, based on a composite score of
profitability, productivity and human capital practices. Key
findings include: -- In 2004, Best-Managed Firms increased their
client base about 11 percent in gross terms through acquisition of
new clients. Referrals from existing clients were the primary
source of clients, accounting for 45 percent of all new client
relationships. -- The second largest source was referrals from
professionals outside the organization (CPAs, lawyers, etc.), which
accounted for 24 percent. The third was active business development
done by principals, who brought in 16 percent of all new clients.
-- Best-Managed Firms, on average, spend 16 percent more on
employee benefits than other firms, and their employees are more
likely to be offered retirement benefits through a 401(k) program.
-- Fifty-eight percent of Best-Managed Firms have hired a former
intern into a permanent position, while just 40 percent of other
firms have done so. -- Twenty-six percent of the Best-Managed Firms
sought to add a specialized business developer in 2005. The report
details the steps that advisory firms can make to avoid the high
cost and disruption of employee turnover, including offering
competitive pay, aligning compensation to career development,
creating a positive culture, and providing employees with new
challenges. "As independent investment advisory firms experience
unprecedented growth, finding and retaining the people who can help
take the firm to the next level becomes critical," said Ann Simon,
vice president of Schwab Institutional. "Advisors are looking for
new ways to successfully grow their business and manage their human
capital, while keeping an eye on the bottom line." Pricing
Strategies for Maximum Success and Best-Managed Firms: Recruiting
and Retaining Top Talent are the latest in a series of Schwab
Market Knowledge Tools(TM) (MKT) reports, an ongoing program of
industry research, white papers and how-to guides from Schwab
Institutional designed to keep investment advisors on the forefront
of trends and competitive challenges facing the industry today.
Offered exclusively to Schwab Institutional clients, the MKT
program delivers relevant and timely information on managing
independent advisory firms for maximum success. About Schwab
Institutional Schwab Institutional, a division of Charles Schwab
& Co. Inc., is a leading provider of custodial, operational and
trading support for independent fee-based investment advisors.
Client assets custodied with Schwab Institutional increased 18
percent to $365 billion between June 30, 2004 and June 30, 2005.
These assets, managed by the approximately 5,000 independent
advisor firms Schwab Institutional serves, represent approximately
one-third of total customer assets custodied with The Charles
Schwab Corporation as of June 30, 2005. About Moss Adams Moss Adams
LLP provides accounting and management consulting services to
advisory firms throughout the US, Canada and Australia. With a
particular expertise in the financial services industry, Moss Adams
has provided consulting services to more than 1,200 investment
management firms, broker- dealers and financial advisors on matters
related to compensation, organizational design, valuation, mergers
and acquisitions, financial management, strategic planning and
leadership development. Moss Adams is the eleventh largest
accounting and consulting firm in the U.S., with a staff of 1,100,
including 180 partners. For more information on Moss Adams, visit
http://www.mossadams.com/industries/sin. About Charles Schwab The
Charles Schwab Corporation (NYSE / Nasdaq: SCH), through its
operating subsidiaries, provides securities brokerage and financial
services to individual investors and the independent investment
advisors who work with them. With over 7 million individual
investor accounts and more than $1 trillion in client assets, The
Charles Schwab Corporation is one of the nation's largest financial
services firms. Its subsidiary Charles Schwab & Co., Inc.
(member SIPC) provides a complete range of investment services and
products, including an extensive selection of mutual funds;
financial planning and investment advice; retirement plans;
referrals to independent fee-based investment advisors; and
custodial, operational and trading support for independent
fee-based investment advisors through its Schwab Institutional
division. Its subsidiary Charles Schwab Bank (member FDIC) provides
banking and mortgage services and products. The corporation's other
operating subsidiaries include U.S. Trust Corporation (member FDIC)
and CyberTrader(R), Inc. (member SIPC) .These companies' Web sites
can be reached at http://www.schwab.com/,
http://www.schwabbank.com/, http://www.ustrust.com/, and
http://www.cybertrader.com/. (0905-1867) DATASOURCE: Charles Schwab
CONTACT: Alison Wertheim of Charles Schwab, +1-415-636-5812 or ; or
Tyler Bradford of Makovsky & Co., +1-212-508-9637 or Web site:
http://www.schwab.com/
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