The Shifting Sands of the Advisory Business

The Shifting Sands of the Advisory Business

By now, everyone should be clutching the memo: the financial advisory and wealth management business is changing.

There’s no avoiding the tectonic shifts brought by a new class of young investors, rising client demand for transparency and individualized solutions, challenges in pricing our services and more. The business is evolving and there’s no going back, and wise firms are not tarrying in moving with the trends.

Consider the millennials. These youngsters aren’t so green anymore: the established boundaries set them at age 25-40 right now, prime years in anyone’s career. The heady dreams of youth are fading, replaced by mortgages, children and myriad other responsibilities. Money is a powerful tool, they now know, and they’re looking for ways to let it serve them.

Financial education is regrettably poor in American high schools and universities (business majors excepted), and surveys suggest that the millennials are hungrily searching the internet to bring themselves up to speed. They sound like a keen audience for our services.

Who will get their business? Research indicates that just shy of 15% handle their own portfolios via a range of digital tools. The digital guru can’t yet beat the human, though: 25% of millennials have already hired an in-the-flesh financial advisor. So around 60% of this generation, now in their prime productive years, are still in need of financial advice. That’s an enormous market waiting to be tapped by aggressive and adroit advisories.

Clients once viewed the advisory and investment profession in a like manner to the proverbial sausage-making industry: they’d pay for the products and savor them, but didn’t want to know how they were made. For them, the face-to-face client experience was crucial. It still is: the
focused attention, regular contacts, cunning plans and rewarding products of the advisor never go fully out of style.

But today, clients want to know what’s happening in the back room. How do you pick the products to recommend? Which models formulate their financial plans, who works on them and how are they vetted? Customers want to know, and most crucially, the want a say in these operational matters. Digital tech makes it possible to customize procedures that were previously rather inflexible – this is the realm where clients seek involvement. Customers no longer simply want you to serve them: they expect to work with you to create an individualized financial solution that suits their circumstances.

Holistic investment advice is no longer a trend to watch: it’s here and getting bigger as we write. Holistic advisory services meet contemporary client demands for personalized service. Straight ‘advice’ is out and ‘counseling’ is in. If a client needs a retirement plan, you don’t simply crunch numbers anymore: you delve into their dreams. Do they hope to settle down comfortably or travel the world? Is a city flat their thing, or do they crave a place where they can tend a garden? Many firms now assign several specialists to serve each client – one for financial matters, another for investments, still another for counseling to align everything with their lifestyle and ideas. The team approach is clearly coming to the fore.

This shouldn’t imply that the ‘lone-wolf’ advisor is headed for history’s ash heap. Far from it: solo advisors who adroitly leverage digital solutions can provide client services that rival those of the major houses. These small players are currently appetizing targets for firms looking to grow via acquisition, the preferred expansion strategy today. This interest boosts the valuations of the solo firms, who already enjoy elevated profits. The independents are in a commanding position these days, so expect to see them mushrooming up in the coming years.

For more information, please read:
Five Trends Reshaping the Advice Business | ThinkAdvisor

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