As the wealth management industry as a whole has moved toward a more independent, fee-based model, so have advisors who hold the Certified Investment Management Analyst, Certified Private Wealth Advisor or the Retirement Management Advisor certifications. In 2007, just 13% of CIMA certificants were independent, whether that be at a registered investment advisor (RIA), independent broker/dealer or dually registered firm. Today, independents account for the largest segment of Investments and Wealth Institute members, the professional organization that administers the CIMA, CPWA and the newer RMA.
According to an analysis by Cerulli Associates, 45% of the institute’s members are independent, 37% are from the wirehouse channel, and nearly 16% are with national or regional b/ds. The rest are with retail bank b/ds or insurance b/ds.
The shift was a surprise to IWI CEO Sean Walters, who came over from the Financial Planning Association in 2007, which was almost exclusively independent advisors at that time. One reason for the change, he said, was due to a small percentage, in the low single digits, of IWI members breaking away every year to go independent. He also attributes the change to the organization’s years-long efforts to make their professional development services relevant to independent advisors. The organization’s rebrand in 2017 has also driven the trend. IWI was known as Investment Management Consultant’s Association (IMCA), a brand that implies a nondiscretionary, consulting approach to clients that’s institutional in nature, Walters said. He believes the new brand attracts advanced practitioners of all stripes.
The group’s members—and the industry overall—is also moving toward a more holistic planning approach to financial advice, with nearly 55% of IWI advisor clients receiving comprehensive ongoing planning advice; on average, these advisors expect to provide financial planning to nearly 64% of their clients by 2020, according to Cerulli. Across the industry, advisors expect to offer this service to 55% of their clients by 2020. One-third of IWI members also hold the Certified Financial Planner (CFP) designation, Walters said.
In addition, IWI members are more likely than other advisors to offer intergenerational planning, charitable planning and trust services.
“The delivery of investment is increasingly becoming commoditized as a service,” said Bing Waldert, Cerulli’s managing director for U.S. research. “What we’re seeing is the idea that non-investment advice is becoming more important in these relationships; advisors are increasingly pricing on a fee basis for their clients; and those advisors that are doing it is, they’re operating in financial advisory teams, which let them deliver more personalized and detailed advice.”
IWI advisors are nearly twice as likely as other advisors (62% versus 38%) to operate in a primarily fee-based business, meaning more than 90% of their revenue comes from fees. Currently, IWI advisors have 17% of their assets in brokerage business, and they expect that to fall to 10% by 2020. On average, advisors across the business have 27% in brokerage and expect that to fall to 19% by next year.
“By pricing on a fee rather than a commission, it allows the advisor to think more holistically about that portfolio of investments they’re building and how it ultimately aligns with a client’s goals,” Waldert said.
Cerulli argues that advisors who hold the IWI’s designations are more sophisticated, measured by more assets under management, less use of mutual funds and more use of ETFs, alternatives and separate accounts and end-client wealth.
They also tend to take more discretion with client portfolios, with 27% operating as a rep-as-portfolio-manager (Rep as PM). Nearly a third of IWI advisors expect to operate as Rep as PM by 2020.
“We do see the industry’s biggest and best advisors increasingly taking control of those client portfolios and working with a wealthier client and for those wealthier clients delivering very customized investment solutions,” Waldert said.
Over the past couple of years, broker/dealers have been nudging advisors away from Rep as PM programs in favor of model portfolios and third-party strategists, motivated in part by increased regulatory scrutiny.
“There are a swath of advisors that are taking discretion over client portfolios that probably shouldn’t, but I think we look at CIMA designation or having the CIMA designation on one of these advisory teams is a mark of a team that we feel more comfortable with them taking discretion over client portfolios,” Waldert added.
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