Russell Investments recently surveyed 358 advisors from 132 firms and found, not surprisingly, that many of them are making significant changes to their businesses in reaction to today’s market environment. The results of the survey confirm many of the things that we have been hearing and saying over the past year, but are worth repeating:

1) Referrals and word-of-mouth marketing continue to be the best sources of new business. We all know how important it is to ask for referrals in a systematic way.  The importance of word-of-mouth marketing is consistent with focusing on a niche clientele, where you are more likely to find clients similar to those you already have.

2) Clients remain skittish, though not necessarily to the point where they are switching advisors. Top-notch client service and attention remain the best ways to alleviate client concerns and maintain relationships.

3) Many advisors are facing squeezed margins and therefore looking for technological solutions to finds way to become more efficient. For example, many are installing more sophisticated CRM systems. We have been saying for a long time that becoming more efficient is one way to increase profitability and counteract the lower revenues that have resulted from poor market conditions.

4) More and more advisors are embracing goal-based as opposed to benchmark comparisons for their clients. This is an acknowledgment of the fact that clients are more concerned with meeting their own individual goals then beating a mostly irrelevant benchmark. Advisors have also become more risk averse and have rejiggered client allocations accordingly.

5) And finally, most advisors acknowledge that they want 250 clients or fewer, and the need to segment clients – in other words providing services based on relationship size – is an important component to building a lasting and profitable business. Advisors must become better at leveraging their own time without sacrificing client service.

We continue to operate in a challenging business environment, and those practitioners who are open to adapting their businesses and practices are likely to emerge as the winners. This not only goes for advisors, but for all segments of the financial services business.

Not surprisingly, a recent study by Barclays Wealth and Ledbury Research found that high net worth individuals are planning to work longer, with many planning never to retire.

The survey of 2,000 individuals found that 54% of U.S. respondents are among those that plan to never retire. While it appears that the global crisis of the past few years has contributed to this trend, it is not the only reason for the results. This trend had been evident for awhile in part due to rising life expectancies. If someone expects to live 20+ years past the age of 65, it is logical that they will need more money in order to maintain their desired lifestyle throughout their retirement years.

These trends have some important implications for advisors. Longer investment horizons for retirees will impact their asset allocations –  not just as they near retirement but throughout their lifetimes. Investors will in general need more growth than in the past. There will be a trade-off: for example, more conservative investments early in life will result in either a later retirement or a more-conservative lifestyle in retirement. Investors need to know their choices as early in their lives as possible.

Especially with where interest rates are today, this phenomenon bodes well for stocks. With housing down as well, there are few places where investors can today grow their portfolios. The yields on many blue chip stocks are very attractive today.

But the investment implications aside, advisors would be well served to visit the retirement discussion with their clients sooner rather than later. It will sometimes be a difficult discussion – and you may have to tell clients things that they do not want to hear – but that is what a true advisor does. The world has changed over the past few years – you need to make sure that you gauge how your clients have as well.

Do you know what the Pareto principle is? Named after an Italian Economist of the early 1900s, the Pareto Principle is more commonly referred to as the 80/20 rule – 20% of our efforts will yield 80% of our results.

Why is this worth mentioning? It’s another way of reinforcing the notion that the most successful advisors generally have fewer clients – but the clients that they do have are wealthier. As a recent Investment News article headline read “One key to being a million-dollar producer? Dumping smaller clients….”

While the concept that advisor success is highly correlated to having fewer overall relationships has been around for a long time – and is in fact rather intuitive – a recent study by PriceMetrix Inc. of more than 1.3 million households adds some al meat to the argument:

* On average, small accounts (less than $100,000) make up 52% of an advisors business yet generate only 9% of revenue

* The average advisor makes only $350 a year (commissions and fees) on small accounts

* Only 24% of the book of the average million dollar producer is composed of small accounts

* The average advisor who slashed small accounts by 5% increased revenue by $43,000

Hey advisors – whether you subscribe to the 80/20 theory or not – these last two bullets are actionable items – dissect your book to see where you stand, and at a minimum, slash 5% for a nice bounce to your income!

The other logical conclusion of these numbers is that if you like serving smaller accounts and want to keep them as part of your business, you better make sure that you have the client servicing infrastructure to support it – because it’s going to be a lot of work! (By the way – the study also concluded that small clients are 108% more likely to switch advisors than they are to become $1 million accounts – ouch!)