Respondents: Revenue increase of less than 10%

According to key findings from the InvestmentNews annual Industry Attitudes survey, which was conducted just before the market meltdown in September, nearly three-quarters of advisers who responded said they’d added fewer than 25 new clients to their practice, and half said their practice’s revenue had increased less than 10% this year.

Overall, the year was challenging for financial advisers — and that was before the Wall Street catastrophe.

According to advisers, even prior to the crisis, clients were more anxious, had more questions and needed more hand-holding.

“Clients were definitely more concerned this year,” said Walid Petiri, chief strategist for Financial Management Strategists LLC of Owings Mills, Md. The firm does not disclose assets under management.

In addition to uncertainty provoked by the volatile stock market, Mr. Petiri believes that clients are “retesting whether they had the right adviser for the right reason” in a difficult environment.

“Things were tougher this year,” said Kent Bowman, a certified financial planner and president of Arrow Financial Solutions PLC of Clinton Township, Mich., which has $93 million in assets under management. “People were either nervous about the economy or about finding the proper advice to deal with it.”

The widespread concern among clients also ate into the time advisers would have spent expanding their practices.

“Working with existing clients was more time- consuming,” said Ronny Tanner, principal of Hand and Tanner Financial Group Inc. of Beaufort, S.C., which has about $100 million in assets under advisement. “We had less time to focus on new clients.”

Being proactive over the past year proved critical to advisers’ efforts to reassure and retain clients, advisers said.

“Writing a quarterly newsletter was the best thing I did,” said Barbara Steinmetz, principal of San Mateo, Calif.-based Steinmetz Financial Planning, which manages $32 million in assets. “Nobody was calling me in a panic [in early September]. The clients know I’m there. That’s the whole secret.”

“We made more phone calls, and sent out more e-mails [during the year],” said Jay Conner, an adviser for Capital Asset Management LLC of Jeffersonville, Ind., which has $75 million in assets under management. “We also encouraged clients to ask more questions, because if they’re not asking us, it probably means they’re asking someone else.”

Compared with last year, 93.9% of respondents lost 25 or fewer clients and 70.6% reported adding that many clients. Roughly 17% of advisers responded to this year’s survey that they added between 26 and 50 clients.

The economic downturn also presented positive opportunities for their practices, advisers said.

“It gives us a chance to reaffirm our value proposition,” Mr. Petiri said. “We can show that we can take into account what is occurring in the market and be forward-thinking.”

“Clients are getting more sophisticated,” Mr. Bowman said. “They’re asking more on-point questions and we can show that we’re ready to answer them.”

Clients also expressed concerns about politics, advisers said.

“Some clients are worried about a possible political shift to the left” as a result of the financial crisis, said Ide Trotter, president and chief investment officer of Trotter Capital Management Inc. of Duncanville, Texas, which has $28 million in assets under management.

REFERRAL PARTNERSHIPS

The value of having a referral relationship with certified public accountants and attorneys was also a practice concern for advisers.

About six in 10 advisers said they had a referral relationship with a certified public accountant or an attorney.

Craig Martin, partner for The Family Wealth Consulting Group of San Jose, Calif., is quite pleased about his firm’s revenue-sharing arrangements with CPAs, as well as with enrolled agents, who are tax professionals authorized by the government to represent clients before the Internal Revenue Service.

Financial Management Strategies is pleased with its referral arrangement, Mr. Petiri said. “It allows us to have professional services found in larger family offices without the overhead,” he explained.

Other advisers are more skeptical and question whether they’re giving more referrals than they’re getting.

“It’s like any other partnership; you have to wonder who’s getting the better deal,” Mr. Bowman said.

For client referrals, advisers said they continue to rely heavily on existing clients. “The only referrals I get are from my clients,” Mr. Trotter said.

This year’s survey showed an increase in respondents who recommend Section 529 college savings plans to their clients (82.8%), compared with last year (78.6%).

A slight majority of advisers (56%) said they had a succession plan in place at their office.

Ms. Steinmetz, who is a certified financial planner and an enrolled agent, said she set up a virtual office last year.

“I gave up bricks and mortar,” she said. “Clients have no problem with it. It wasn’t the buildings they were after; it was me.”

Roughly 68% of survey respondents said the overall size of their staff had not changed.

E-mail Charles Paikert at cpaikert@investmentnews .com.