READER POLL: Could More (Consolidation) Mean Less?

There’s a lot of talk these days about consolidation in the advisor market – but what have NAPA Net readers seen – and/or experienced?

The majority of respondents to this week’s NAPA Net reader poll say consolidation is occurring, though those responses ranged from 62% who said “yes,” 12% who said “among smaller firms, maybe,” and another 1 in 10 who responded, “it depends on what you mean by consolidating.” The remaining 15%, of course, said “no.”

“It’s happening at a level I have never seen before,” noted one reader, who went on to explain that “fee compression, increased efficiencies, national brand, DOL reg changes, and being at a boutique firm that understands their business are key items. Also, firms working to expand revenue lines are where it is going and they want to be part of it.”

Where that consolidation has been seen, we asked readers what they attributed it to, and they indicated (more than one response permitted):

53% – Competition
51% – Desire for greater efficiency
45% – Fee compression
42% – Succession planning
29% – Economics
16% – Potential changes imposed by the fiduciary rule
13% – Technology/robo advisors

“The size of plans has grown, and so have the demands of plan sponsors on advisors,” explained one reader. “Some cannot keep up. Also, many advisory firms just cannot grow their revenue, so a sale becomes an option.”

“To be a good retirement plan advisor requires so many disparate knowledge and skill sets – investments and funds, plan design and compliance, recordkeeping, education, etc. – that it’s no longer practical for individual advisors to stay fully up to date on all aspects of plans,” noted one reader. “That’s why affiliating with a larger similarly situated organization makes sense, for both economics and client service.”

Consolidation Stations

While consolidation may have been seen, it hadn’t come “home” for most of this week’s respondents. More than half (59%) said their firm hadn’t consolidated during the past two years, though one in five (21%) responded “not yet,” 18% said another firm had consolidated with theirs – and the rest, of course, had.

Among those readers whose firms had consolidated, the reason(s) most commonly cited for doing so was a desire for greater efficiency, followed closely by succession planning, economics, and distantly by fee compression and competition. One reader explained it was about the “potential for referrals with existing business.” Or, as another reader noted, “We are bringing on new teams who are looking for efficiencies and a desire for collaboration on a larger scale.”

“I think we’re getting a constant barrage of marketing from the firms that would like us to consolidate and from the business brokers who want to help,” commented one reader. “Those firms have figured out that it’s easier to grow through acquisition and they’re more visible than in the past. A number of advisors are aging out of the business, so those succession plans shouldn’t be considered consolidation. Forcing brokers to roll up their business under one person who meets the ‘I know something about retirement plans’ also shouldn’t count as consolidating, IMHO.”

Ballot, ‘Boxed’

Switching gears, we did ask readers if they had voted – 96% had (or planned to). More than two-thirds (69%) hadn’t voted early – and among them, roughly 4-in-10 had voted early in previous elections.

We did get a number of additional comments on voting – here’s a sampling:

  • I wish politicians would be straight with us. They make it seem like if you vote for them, all your problems will be solved. How about saying stuff like, “I am in favor of this. My opponents are in favor of that. We will compromise and have both. I know you don’t want that, but would you rather have this and that, or not have this at all? Because you can’t have this without that.” Or, “You want us to spend tax dollars on everything, but we can’t afford everything, so we are going to have to make some choices, and this is what I am in favor of choosing.” Political commercials are so insulting. They talk to us like we’re stupid. Maybe we are.
  • My grandfather lived in Chicago his whole life. When he passed away and we went through his old items, he had an old official State of Illinois-issued election judge vest. Inside the vest was an old piece of paper with the lever numbers he was supposed to pull when he went into the booths to “help the little old ladies vote.” Chicago politics at its finest.
  • I am glad to see registered voters not be so apathetic as in past years; somewhere between apathy and ill-informed hysteria is common sense for the greater good of our country, so vote for the policies, not the person, but VOTE!!!!
  • I will vote on election day on my way into the office (my polling place is en route) as I usually do. Our state (MI) is considering allowing absentee voting for any reason, which I am in favor of, but personally I only absentee vote when I’m truly going to be out of town. I kind of like the excitement of election day and actually going to the polls. I am happy to live in a country where I am allowed to vote…”
  • Someone sent me a thank you email last week, and he ended the message with: “Hope your candidates win.” I thought to myself, wow, thats a very generous well-wishing considering you don’t know which way I roll politically!

Thanks to everyone who participated in this week’s NAPA Net reader poll – and who voted!

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