In this article we discuss 10 best financial advisory firms to buy now. You can skip our discussion of the state of the wealth management industry and growth catalysts for the financial advisory stocks and go directly to 5 Best Financial Advisory Firms To Buy Now.
The coronavirus crisis gave a wakeup call to millions of individuals and businesses worldwide: you cannot just wing it when it comes to financial planning and wealth management. A survey conducted by the College of Financial Planning shows that 71% of financial advisors saw a rise in clients after the pandemic. As the economic anxiety and fears of recession increase worldwide, the already massive wealth management and financial advisory industry will thrive. A Schwab survey in 2020 showed that over 52% of the surveyed Baby Boomers said that the pandemic has made them more focused on developing a clear financial plan for retirement.
Growth Catalysts for Financial Advisory and Wealth Management Stocks
The wealth management and financial advisory companies have a lot of room to grow, as current market trends show that just a fraction of common people are using financial advisory services. A national poll conducted by CNBC and Acorns by SurveyMonkey in October 2020 showed that 99% of the Americans leave their financial planning to their parents, spouse or someone else. Only 1% use a financial advisor. The survey questioned 2,776 adults. Nearly 40 million people have lost their jobs in the U.S. as a result of the coronavirus pandemic. With job losses rising and financial anxiety on record highs, young Americans will start using the expertise of the financial advisory firms to plan their future and invest smartly.
Robo Advisors and Rewired Investors
Current trends show that wealth management and financial advisory companies tend to target only the rich. A report from Deloitte shows that mass affluent customers usually represent 80% or more of the net income generated by retail banks. Affluent customers usually regard their relationship with their provider of wealth management services as very important, the report added. As a result, most financial advisory companies and banks are targeting wealthy individuals. But this trend will change in the future, as young Americans, whom Deloitte calls “re-wired” investors, are showing a great interest in wealth management. To capture this potential customer base, financial advisory firms will have to change their attitude and practices, as Generation Z, Generation Y and even Baby Boomers are skeptical of authority and old investment methods.
Deloitte also predicts and data-driven approaches, AI and machine learning will disrupt the wealth management and financial advisory sectors. A survey by Corporate Insight said that the total assets of the 11 leading robo advisors in the US jumped 65% in just one year.
Challenges for the Financial Advisory Industry
The rise in aged population presents a challenge as well an opportunity for financial advisory companies. According to U.S. Census Bureau, in less than two decades, adults will outnumber kids in the country. Financial advisory firms will benefit from the increasing number of individuals concerned for their retirement plans. But the graying of population problem is also affecting the industry. Deloitte said that 1/3 of the current workforce in the wealth management industry will retire in the next 10 years. Financial advisory companies will have to recruit and train nearly 240,000 advisors to maintain current service levels. The generational gap between advisors and customers also presents a significant challenge for the industry.
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With this context of the industry in mind, let’s take a look at 10 best financial advisory firms to buy now.
10. UBS Group AG (NYSE: UBS)
UBS is a Swiss investment banking and financial services company. The company offers private investment advice to individuals and businesses. It is registered with the U.S. SEC as an investment adviser. UBS shares recently rallied after the company announced a $4.5 billion share repurchase program. For 2020, UBS board plans to propose a dividend of 37 cents per share, down from the dividend of 73 cents for 2019.
A total of 17 hedge funds tracked by Insider Money held long positions in UBS Group at the end of the third quarter.
Read: Is UBS A Good Stock To Buy Now?
9. Northern Trust Corporation (NASDAQ: NTRS)
Illinois-based Northern Trust offers financial services to corporations, institutional investors and individuals. According to an estimate, about 20% of the wealthiest families in the U.S. are using Northern Trust’s wealth management services. In the fourth quarter, the company posted GAAP EPS of $1.12, missing the consensus estimate by $0.37. Revenue in the quarter came in at $1.53 billion, beating the Street’s estimate by $30 million.
A total of 28 hedge funds tracked by Insider Monkey held stakes in Northern Trust entering the fourth quarter.
Here’s what Diamond Hill Capital said about NTRS in their Q1 2020 Investor Letter:
“We took advantage of the recent market dislocation to add a position in high-quality financial services company Northern Trust Corp., one of the largest providers of advisory (private banking) and custody and administrative services in the U.S. The company is also a leading provider of wealth management, asset servicing, asset management, and banking to corporations, institutions, affluent families, and individuals. The business is relatively resilient with attractive returns on equity and a stable dividend and management has proven to be excellent stewards of capital over long periods of time.”
Read: Were Hedge Funds Wrong About Northern Trust Corporation (NTRS)?
8. Credit Suisse Group AG (NYSE: CS)
Switzerland-based Credit Suisse offers wealth management, investment banking and financial services. The company’s experts offer premium advice to individuals and businesses about asset management, investment and strategies to achieve financial goals. In December 2020, Credit Suisse said that it plans to restart share buybacks in January 2021 of up to $1.7 billion. The bank will also continue to accrue for at least 5% dividend growth per year.
As of the end of the third quarter, Jim Simons’ Renaissance Technologies owns 2.48 million shares of the company, worth $24.68 million. A total of 29 hedge funds are bullish on Credit Suisse, according to data by Insider Monkey.
7. T. Rowe Price Group Inc (NASDAQ: TROW)
T. Rowe Price Group Inc is one of the 10 best financial advisory firms to buy now. The company offers advisory services, account management and retirement plans for individuals and businesses. The Maryland-based company has about $1.3 trillion assets under its management. In the fourth quarter, T. Rowe Price assets jumped 12%, driven by $2.2 billion of inflows and strong market gains. Adjusted EPS in the period totaled $2.89, crushing the Street’s estimate of$2.63.
Cliff Asness’ AQR Capital Management owns 846,212 shares of the company, worth $108.43 million. Overall, 34 hedge funds tracked by Insider Monkey held long positions in TROW.
6. BlackRock, Inc. (NYSE: BLK)
BlackRock is one of the largest financial advisory companies in the world, with about $8.67 trillion in assets under management and operations in over 30 countries all over the world. Recent regulatory filings show that the company is planning to invest in derivatives that draw value from financial instruments including Bitcoin. The company’s net inflows in the fourth quarter came in at $127 billion, driven by strength in iShares.
As of the end of the third quarter, 39 hedge funds tracked by Insider Monkey held long positions in BlackRock. The total value of these stakes is $922.7 million.
Read: BlackRock Inc. (BLK) A Bull Case Theory
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Disclosure: None. 10 Best Financial Advisory Firms To Buy Now is originally published at Insider Monkey.
