The World of the Registered Representative — Executive Summary

The World of Registered Representatives Insights and Opportunities for Brokerage and Investment Management Firms Table of Contents About This Book Executive Summary Chapter 1:Segmenting the World of Registered Representatives Chapter 2:Critical Concerns Among Registered Representatives Chapter 3: The Competitive Environment Chapter 4:Changing Broker/Dealers Chapter 5:Product Focus Chapter 6:Mutual

The World of Registered Representatives

Insights and Opportunities for Brokerage and Investment Management Firms

Table of Contents

About This Book

Executive Summary

Chapter 1: Segmenting the World of Registered Representatives

Chapter 2: Critical Concerns Among Registered Representatives

Chapter 3: The Competitive Environment

Chapter 4: Changing Broker/Dealers

Chapter 5: Product Focus

Chapter 6: Mutual Funds

Chapter 7: Managed Account Programs

Chapter 8: Value of Field Personnel

Chapter 9: Registered Representatives Perceptions of Selected

Technologies

Chapter 10: Support Services

About the Authors

Executive Summary

Chapter 1: Segmenting the World of Registered Representatives

To get a clear picture of the world of RRs, we asked them an extensive series of questions about their clients, competitors, products, and business relationships. Then, to get an even more detailed snapshot, we recast the information that we had gathered based on the RRs’ practice parameters and business model.

  • The 4,106 RRs in this report were segmented into four quadrants based on two practice parameters – their annual production and the size of their client roster;
  • The largest of the four quadrants, accounting for over 40 percent of the total, included those RRs with over $400,000 in annual production and more than 150 clients;
  • The data was then reorganized on the basis of the RRs’ three business styles – wealth management, product specialist, and investment generalist; and
  • Almost two-thirds of the 4,106 RRs surveyed fell into the investment generalist category.

Chapter 2: Critical Concerns Among Registered Representatives

Our research enabled us to give an updated "state of the industry" report of the world of RRs, including a list of their priorities when it came to what the wanted for themselves and their businesses, what they thought their clients were looking for, and what they expected from broker/dealers and wholesalers.

  • The twin challenges of finding wealthy clients and generating significant asset growth were the leading concerns of RRs;
  • Competition for clients and market volatility were among their other top concerns; and
  • Unlike their peers, the most successful RRs were as concerned about losing their current, very wealthy clients as they were about finding new ones.

Chapter 3: The Competitive Environment

In order for RRs to create the profitable business practices they want, they need good products, strong support services, and the means to compete effectively.

  • Both today and three years from now, RRs saw their fellow RRs as their chief competition, followed by independent financial advisors and money management firms;
  • Online brokers, who only recently were seen as a major competitive threat, were all but discounted by RRs;
  • RRs were unfazed by some of the newer entrants into the field, including banks, insurance agencies, and attorneys; and
  • The elite RRs, while generally less concerned with the competition, were most worried about money management firms.

Chapter 4: Changing Broker/Dealers

Broker/dealers have to find ways to keep those RRs whose success has led them to take their business – and their clients – elsewhere.

  • About one in every five RRs said they were very likely to change broker dealers in the next two years;
  • The RRs’ top two motivations for switching broker/dealers were a general unhappiness with their current arrangements and a desire for better business support services; and
  • Of those contemplating a change, only a handful were considering starting their own business as opposed to joining another broker/dealer.

Chapter 5: Product Focus

Products were at the core of the relationships between RRs and wholesalers and brokerages, and, wherever their interest may have been, individual securities remained the dominant product for a majority of RRs.

  • From a product standpoint, more than two-thirds of the RRs relied on individual securities to drive their businesses;
  • Of those who had a current concentration in individual securities, about a quarter were interested in moving to managed accounts while over a third of those currently focused on mutual funds felt the same way;
  • Looking three years down the road, the RRs adjudged trusts, family limited partnerships, and other advanced planning solutions to be the most important products on their horizon; and
  • The more successful the RR, the more esoteric their product interest.

Chapter 6: Mutual Funds

Mutual funds are an important product for a sizable number of RRs. With more than 8,000 mutual funds to choose from, we found that RRs differentiated one from the next not by evaluating the money managers or even the fund’s performance, but by the influence of the brokerage firm.

  • The average RR used 3.5 mutual fund families;
  • The leading selection criterion for separating one mutual fund family from another was the influence of brokerage firms followed by the RR’s relationship with the fund company’s wholesaler;
  • Wholesalers, peers, and brokerages were the three leading sources for information about mutual funds;
  • When rating wholesalers, the RR’s found that the wholesaler’s ability to understand them and their practice were the most important considerations; and
  • Despite the seeming importance of wholesalers, only one-third of the RRs as a group rated their wholesaler’s performance as "excellent" and only one in fifty of the most successful RRs did so.

Chapter 7: Managed Account Programs

Though RRs understood that affluent clients were increasingly interested in managed accounts, they said they were not getting what they wanted from managed account programs and platforms. In what is worse news still for providers, our research revealed that those RRs with the largest asset pools were among the least satisfied.

  • Only 59.9 percent of RRs using managed accounts for more than half of their production were well satisfied with the platform;
  • When selecting investment managers, RRs gave top priority to the manger’s philosophy and process;
  • RRs considered wholesalers and their professional peers to be the most important sources for information about investment managers;
  • There is a significant market opportunity for investment managers who want to grow their managed account business and achieve a strong share among the RRs who control the largest pools of investment assets; and
  • RRs believe that the most important task of a wholesaler was to understand the competitive and institutional challenges that confront them in different stages of their career and in different business models, yet the most successful RRs felt that wholesalers were falling short in this regard.

Chapter 8: The Value of Field Personnel

The role and value of field personnel in general and the branch manager in particular was very much a vexed question among RRs, with the less established RRs having found them valuable while the more successful RRs had little interest or confidence in them.

  • RRs of every level and business model agreed that it was important to get field personnel and branch managers to shoulder administrative functions;
  • Regarding problem resolution, access to resources and products, and training, the more successful the RR, the lower their interest level;
  • Firms should consider segmenting their field forces and developing special
    units and "wealth management platforms" to support the needs of the elite RRs who want preferential treatment. This move would have the added benefit of making the platform more economical, as sophisticated resources do not need to be dedicated to low-end producers that would not make use of them in any case.

Chapter 9: Registered Representatives Perceptions of Selected Technology

Technology was seen as an essential tool for helping RRs build and upgrade their businesses, but while their technology needs were being met at the most basic level – trade order entry, for example – many RRs had yet to take advantage of some of the more sophisticated options available such as PC-based portfolio management and research.

  • RRs wanted to see client relationship management functionality integrated into their desktop platforms;
  • RRs expected to see more enhancements that would help them better manage their book of business; and
  • RRs were aware that their clients had increasingly high expectations on the technology front, so they wanted customized websites for their clients.

Chapter 10: Support Services

At every level and for every business model, RRs relied on technical, marketing, and practice management support from the brokerage firms they represented and the investment management firms they were affiliated with.

  • When it came to technical support, RRs as a group were most interested in those services that would facilitate their investment management proposals;
  • RRs considered advanced sales and marketing training to be the most desirable forms of marketing support services, narrowly edging the development of advisor referral and joint venture programs; and
  • RRs wanted to know as much as possible about the best practices of their most successful peers.

The World of Registered Representatives study is sponsored by iihighnetworth.com

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