My friend Sipho in South Africa recently told me there are about 8,000 people for each advisor in his country. I dug up some other stats on the subject and find that there are about 1,200 in the United States, about 3,100 in the UK, around 1,800 in Australia, and 259 in Singapore. Prospecting must be challenging in Singapore.
As with all statistics, (and we don’t know if the definition of advisor is a constant) it is smart to go a step beyond. What should the ratio be?
There are two considerations:
- How many people would benefit from the service?
- How many advisors will there be given the rewards for being one?
I have not done much research on this subject but many advisors in the UK left the business a few years ago because it was no longer an attractive way to make a living. So, a higher ratio. The question of how many links would benefit seems to have been unconsidered.
There are many reasons the benefit side should have had more prominence.
- People don’t know enough about financial products. They hold uninformed beliefs about many of them and have no strategic vision. That means they have no method of attaching the methods to a well formed plan.
- People are emotional. Greed, fear and impatience being among the more insidious. Advisors provide a damper. Ideally by putting current events in perspective of the strategic vision.
- People procrastinate. Advisors can be quite task driven. A well crafted plan is of no use unless implemented, tracked, reviewed and revised.
- Isolated facts are useless. It is useless to know that out of a group of 100,000, 65-year-old male in the United States, 2,457 are expected to die within the year. To have meaning facts must have context. Something like half of 65 year-olds live to 83 and 10% of them live to 93. Connecting that with your known health, family history and your lifestyle can give you a clue about how much money you can draw from your savings next month.
- Hype is debilitating. Money needs a guardian, but many people don’t use one. Government and media perpetuate the belief investing is rigged in favour of the advisers. Financial planning, execution and continuing evolution of the plan is not an easy do-it-yourself task. Beyond that, good advisors provide a conscience, cheer-leading services and emotion soothing. Those softer services provide the greatest financial result.
So long as people hold the idea that saving pays off tomorrow and spending pays off today, there will be a need for external guidance.
For the people who get the fundamentals of financial management, advisors can provide value by helping them see voids in their thinking, identifying conflicts and offering a larger product shelf than they can acquire on their own. Efficiency has some value.
People should decide if there is a cost/benefit to using an advisor and proceed accordingly.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772