A rebound in the Standard and Poor's 500 and growth in income levels will boost demand
Los Angeles, CA (PRWEB) July 01, 2012
The Financial Planning and Advice industry has been on a roller coaster ride over the five years to 2012. Revenue is estimated to increase at an average annual rate of 1.8% during the period, but this belies the 7.0% revenue jump expected in 2012 to bring revenue to $46.8 billion. According to IBISWorld industry analyst Dale Schmidt, the industry is composed of advisers and planners who provide financial advice in conjunction with other activities like portfolio management, protection planning and brokerage services. Economic drivers like capital market fluctuations, unemployment, disposable income and savings rates greatly affect the industry.
Advisers generate revenue in a multitude of ways, including financial planning fees, investment commissions, insurance commissions and other fees. The recession, highlighted by increased unemployment and decreased disposable income, hurt new and recurring advice fees. Since consumers had less available income, they saved their money instead of investing it. As a result, it derailed the industry's string of years marked by strong revenue growth. The fall of the Standard & Poor's 500 index (S&P 500), which contracted by 20.0% between 2008 and 2010, reduced the total value of assets under management (AUM), forcing a contraction of revenue generated from fees on total AUM. Fees from insurance policies also declined, because new business dwindled and many existing policies lapsed. The recession is not the only factor that has negatively affected the industry. “The industry faces increased external competition from do-it-yourself investors and full-service security brokers, placing further downward pressure on revenue,” says Schmidt The five years to 2017 are expected to be better for the industry. The recession's psychological effects will encourage more individuals to seek financial advice, while the capital markets will rebound. IBISWorld estimates the S&P 500 will grow 5.4% in 2012, helping increase total AUM and raising revenue generated from wrap fees, which are annual fees charged on assets under management.
The concentration of the Financial Planning and Advice industry in the United States is medium, with the four largest players - Morgan Stanley Smith Barney, Wells Fargo, Bank of America and Ameriprise Financial - accounting for about 45.9% of the market. The other half of the industry includes a large number of relatively small firms, regional firms and independent financial advisers. The industry's concentration has increased substantially over the five years to 2012, due in part to the recession. Larger players have become stronger by acquiring weaker competition that floundered during the economic downturn. For more information, visit IBISWorld’s Financial Planning and Advice report in the US industry page.
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IBISWorld industry Report Key Topics
The industry comprises firms and individuals that provide financial planning, financial advice and wealth management to individuals and business clients. Firms provide advice in conjunction with other activities such as portfolio management, protection planning and brokerage services. This industry does not include mutual fund companies, hedge funds, discount brokers, insurance brokers or other companies that provide these services outside the context of a written financial plan.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.