Financial Industry Sees Hard Times With a New Competitor

by Nigel Bolton-Shaw on August 10, 2012

US financial advisors are having a hard time, as a report from Cerulli Associates informs us. Three years in a row, financial advisors have seen their ranks shrink.

But maybe there are other reasons as well, including one we’ll speculate about at the end of this article.

What isn’t up for speculation is that financial services personnel are suffering. Reuters, reporting on the Cerulli survey, points out that 7,000 left the industry last year, or 2.3 percent.

The total now stands at 316,000 but the trend is expected to continue downward with a shrinkage of some 20,000 individuals over the next five years.

Cerulli analysts said the shrinkage spoke directly to the health of the industry, which is “declining.” Here’s some more from the article:

The investment advice business is losing people as older advisers retire or move to other lines of work. Meanwhile, assets under management across all investment advice channels grew only 0.2 percent to $11.6 trillion between 2007 and 2011.

Cerulli’s data showed that independent broker networks – a group whose advisers tend to have lower revenue production – were among the hardest hit among the different categories of investment firms.

The ranks of self-employed broker-dealers fell 14 percent last year to about 80,000, reflecting the difficulty of operating an investment business when clients made fewer trades and the stock market ended flat for 2011.

For brokers who joined independent networks after falling short of production goals at the bigger firms, the next step was a new career, he said.

Could Gold Be Tripped Up by a Coming Deflation?

Jim Puplava has robust convictions….The CEO of Financial Sense News Hour, Jim is a man you should listen to carefully if gold factors in your portfolio or if you are thinking about adding gold anytime soon.

In this interview, Jim talks about how the dollar affects gold prices.

He discusses whether we are moving into a phase of deflation or inflation and gives his views on what exactly that will mean to gold investors.

He discusses the likely impact of inflationary or deflationary forces, which one he believes will win out, and the effect it will have on our economy.

Finally, he makes a very interesting prediction.

Of course, any investor will tell you that deflationists and inflationists have been arguing for years.

Each side has data to back up its claims, so investors end up none the wiser and non the wealthier. All the arguing simply causes confusion, and that invariably that leads to inaction.

Read More…


It used to be that only one out of every seven financial advisors would stay in the industry, but that number may have grown even more challenging. The “vast majority” of entrants now fail to create a career for themselves.

Registered Investment Advisors have seen growth in an otherwise stagnant industry. These professionals peg their earnings to funds under management and their ranks grew by nearly three percent last year to about 30,000.

Assets grew to about $1.4 trillion, showing clients would rather pay a fee than a commission. But the big four brokerages (Bank of America’s Merrill Lynch, Morgan Stanley, UBS and Wells Fargo) did not see significant expansion and client assets remained around $5 trillion, down 3.3 percent since 2007.

Industry estimates see Wall Street’s largest brokers losing another 5,000 brokers by 2016. This would bring the headcount down to 45,000. Conversely, RIAs are expected to grow to 36,000.

Cerulli analysts are quoted as saying the biggest problem for the industry is that “There isn’t any new wealth creation or any new asset appreciation because the markets are really going nowhere.”

But this is an astonishing statement to make. Physical gold and silver have appreciated fivefold in the past decade, and various forms of commodity and metals securitization have done very well.

The problem with Wall Street and its spin-off independent sector is that financial advisors still remain captives of their product providers. Mutual funds, Exchange Traded Funds, private placements, secondary offerings, etc. are what financial advisors are pushed to provide to an increasingly reluctant public.

It is not simply a question of the stock market not growing, as financial advisors should be equipped to generate performance for their clients in good times and bad.

What the current problems of the financial services industry shows us most clearly is that it remains captured by business as usual in an era that calls for innovation and change.

History shows us that often large industries are unable to adapt. In such cases customers turn to new and innovative solutions.

It is likely that many investors who would have used a financial advisor in the 20th century may be turning to other resources in the 21st including most prominently …

The Internet.


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