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Direct-Selling Financial Advisors Nail More Business and Provide Jobs for Those Wanting to Skip the Hard Sell

In the world of financial advice and wealth management, what do you think is second behind the big banks that are quickly gaining momentum?

“Direct”-selling firms—particularly Fidelity, Vanguard and Schwab—pose the largest current threat to the wire-houses, says Scott Smith of Boston-based Researcher Cerulli Associates in an interview with eFinancialCareers.

Smith says there are some solid career opportunities at these firms, especially for those who would prefer to speak with existing wealth management customers on investment strategy, rather than hustle to drum up new business of their own.

Some facts about the direct channel:

After the wealth management giants, UBS, Merrill Lynch, Morgan Stanley and Wells Fargo, direct-selling firms represent the second largest U.S. retail distribution channel, with $3.68 trillion in assets at year-end 2010, versus $4.7 trillion at the four big wire-houses, says Smith.

Cerulli reports that the Fidelities and Vanguards of the world—whose customer solutions are largely technology-driven as opposed to customized—grew assets under management faster than traditional advisory channels between year-end 2008 and 2010, posting a compound annual rate of 19 percent versus 14 percent for traditional advice channels.

There are other new entrants into the advice space that provide customized solutions tailored to clients’ needs, such as Registered Investment Advisor (RIA) firms. Recently, Cerulli observed that the fastest growth in any segment of the advice space is found in RIA’s multi-family offices practices, which grew their assets under management at a rate of 18 percent during 2010.

Yet the success of the direct channel offers an entirely different sort of career opportunity for job candidates more interested in comfort and stability than in getting out there and bringing in new business.

Interpreting something computer generated

An investment advice person at Fidelity or Schwab will usually be interpreting something computer generated in order to assist clients with those firms, says Smith, and admittedly, it’s a much more “mechanical” function than financial planners provide. But make no mistake, says Smith: “These are not entry-level positions.”

You’d need to do “two to five years” of telephone and administrative work before being entrusted to an advice role at a direct-selling firm, says the Cerulli analyst, noting that the role could be highly attractive to someone with a finance degree who likes to help people without having to cold-call or gather assets on their own.

The individual in question would likely be someone who’s shown initiative over time and would end up with a fairly comfortable job that pays somewhere into the six figures within 10 years, says Smith.

Moreover, the direct advice space is picking up some fairly large accounts these days. Cerulli defines its “sweet spot” as clients with between $100,000 and $2 million in investable assets. “These clients control the bulk of the investable assets in the U.S., and they tend to have high enough balances to make them attractive clients,” Cerulli says.

According to Smith, the direct-selling advice firms are often attracting larger accounts as well, sometimes those with $2 to $5 million of investable assets, where customers want to bypass the higher-end wealth management shop, whose solutions can come with a larger price tag.

AUTHORJanet Aschkenasy Insider Comment
  • In
    4 April 2012


    First allow me to say that I really think you have written a great article. It is informative fact based your research and it vice is spot on in my personal opinion.
    With that being said, I would like to ask you a question or two. First I would like to know the best ways one would go about obtaining the administrative or 2-5 years of background work? Also, I would like your opinion or advice on what you think is the best firm out there for someone who is the ideal candidate for 1 of these entry level positions that you described in the article?
    That would prepare me to be an advisor or give. advice at 1 of these fidelity's vanguards or schwab's

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