Financial Planners & Investment Advisors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 19,400 financial planning and investment advisory firms in the US provide investment advice and develop financial plans to meet client goals. A company may also act as a licensed broker/dealer or work with third party broker/dealers, which sell financial or insurance products. Firms may specialize in a particular client base, such as high net worth individuals, non-profit organizations, or corporate executives.

Competition From Alternative Sources

Financial planners and investment advisors compete with a wide range of alternative sources, including banks, securities firms, portfolio managers, mutual funds, insurance companies, accountants, online-only services, and clients themselves.

Online Financial Planning And Advice

Online-only financial planners and investment advisors are a hot market, generating impressive account growth and attracting millions in venture capital.

Industry size & Structure

The average financial planner or investment advisor operates out of a single location, employs 10-11 workers, and generates $2.4 million annually.

    • The financial planning and investment advisory service industry consists of about 19,400 firms that employ about 201,400 workers and generate about $47 billion annually.
    • The financial planning and investment advisory service industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for over 61% of industry revenue.
    • Large fee-only investment advisory firms include Financial Engines Advisors, Hall Capital Partners, and Chevy Chase Trust. Large financial planning and investment advisory firms that also provide asset management and other services include Ameriprise Financial and Lazard.
    • The industry includes national and regional firms, franchises, and independent operators.
                                      Industry Forecast
                                      Financial Planners & Investment Advisors Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      Nov 12, 2022 - ESG Investment Strategy Effectiveness Questioned
                                      • Investing based on environmental, social and governance (ESG) factors continues growing but the effectiveness of the strategy is unclear. Vanguard Group researchers found no significant difference in returns between ESG and non-ESG funds over a 15-year period. Companies in ESG funds had worse compliance on labor and environmental rules than companies in non-ESG funds, a study from researchers at the London School of Economics and Political Science and Columbia University concluded. Former BlackRock asset manager Terrence Keeley said that the strategy has proved to be neither a reliable generator of returns nor a real catalyst for change. He argues that investors should shift money away from ESG indexes toward “companies with persistent environmental and social problems and engaging them to change.” Keeley was a BlackRock senior adviser who personally managed clients including the Bill and Melinda Gates Foundation and the University of Notre Dame’s endowment.
                                      • Proposed regulations from the Securities and Exchange Commission would establish a common benchmark for how environmental, social and governance investment (ESG) products are labeled, marketed, and reported. ESG funds have boomed, exceeding $350 billion in net assets in 2021 in the US. Industry experts say that any changes could prompt investors to exit from funds that don’t appear to be taking the standards seriously. ESG definitions vary widely between funds, making it possible for fund managers to exaggerate their consideration of environmental and other criteria in selecting constituents, according to the SEC. Mutual fund ratings firm Morningstar counted more than 600 funds mentioning ESG in investor literature before it changed how it tracked such funds in part because blanket sustainability statements are increasingly common, the company said in a letter to the SEC.
                                      • A legal test is used by US regulators to determine what qualifies as an investment contract and therefore should be regulated by the US Securities and Exchange Commission (SEC). SEC chair Gary Gensler said that most cryptocurrencies pass it. “Of the nearly 10,000 tokens in the crypto market, I believe the vast majority are securities,” Gensler said. Gensler is referring to the so-called Howey Test, which stems from a 1946 US Supreme Court case. Some experts note that crypto prices are in a bear market or “crypto winter,” and regulation appears increasingly likely. Crypto advocates—including some members of Congress—have pushed for any regulation to come from the US Commodity Futures Trading Commission (CFTC) rather than the SEC. Gensler, who ran the CFTC from 2009 to 2014, has acknowledged that a minority of coins, including bitcoin, might qualify as commodities rather than securities.
                                      • Financial planning and investment advisory firms are changing hiring strategies to maintain adequate staffing levels. Incline Wealth Advisors, for example, has broadened the scope of acceptable qualifications from those with traditional finance backgrounds to applicants who were business majors in college or who pursued degrees in related fields like marketing. Firms have an average of three open positions in mid-2022, according to Ameriprise Financial, which surveyed more than 260 advisors. Doug Fritz, co-founder and CEO of F2 Strategy, an industry consultancy, noted that the talent shortage is most pressing in technology areas within advisory firms. A survey by his firm found that 78% of financial advisory firms plan to increase their tech resources in the next two years, on top of 84% of the firms who have increased their resources over the past two years.
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