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 Industry
Insight from Fred Barstein
Credit Crunch Hitting Even the Most
Successful Retirement Advisors
When most
advisors hear about the credit crunch that is affecting
not only small businesses, but even many larger
entities, they generally think about the effect on the
stock market or how it makes companies delay making
decisions about their retirement plan.
Retirement advisors who
are serious about this business need to start viewing
themselves as small businesses themselves, not
transactional brokers or employees of a broker dealer.
As such, advisors need to
evaluate the effects of the credit crisis on them and
how it has really hurt their ability to grow, prosper,
and even survive.
Most good
retirement advisors are basically very skilled sales people,
who if they are lucky have acquired technical knowledge with
a little bit of business savvy, leadership, and management
skills.
Sales people by nature are
optimistic and believe that they can solve most business
problems just by working harder and generating more sales.
Indeed, even one large sale in
the DC business can save or make an entire year.
This recent market is
different and many advisors are showing the emotional scars.
Though the financial markets
have rebounded this year, they are still significantly down
from their all time highs.
No doubt that crisis and
upheaval create opportunities with many of the experienced
retirement advisors, especially the 4,000 “Masters” who have
more than 25 plans or more than $100 million under
management, taking advantage by dramatically increasing
plans under management.
But to take advantages of
opportunities, it requires resources and most retirement
advisors do not have the cash to invest in their business;
this brings us to the credit crunch.
If you have not
noticed, banks have stopped lending to almost everyone.
Credit card companies have
severely restricted credit lines because they are now
putting away capital for every dollar in credit lines
extended.
Unless they wanted to put a
lot of capital on the sidelines, they had to shrink credit
lines.
Even one of the large
non-public broker dealers with more than 10,000 reps
admitted that until recently, they could not get access to
capital.
What chance do individual
advisors have?
So the dilemma is that
experienced “Master” retirement advisors continue to grow
their business and see opportunities to grow even faster,
but their revenue is down because assets are way off their
high water mark while their expenses continue to rise with
increased plans under management and the costs needed to
acquire them.
There is no easy answer to the
current problem faced by even the most successful
advisors. Perhaps
all that the best advisors can do is take stock of what
has happened, start thinking about creating a business
plan, and act like the small business they really are -
even if they are employees of a wire-house.
Then during the next downturn, these savvy
business people will be able to take advantage of the
many opportunities crisis offers at the expense of their
brethren who think they can sell their way out of any
bind.
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