The Future of Advising

What’s changing and how you can prepare

Introduction

Financial advising has come a long way since its inception over 50 years ago. Along the way, the industry has faced (and survived) a number of disruptions. With the advent of the internet, millions of Americans have gained access to financial information and tools that were previously the exclusive purview of their financial advisors. Advisors – and the tools and services they provide – have had to adapt.

In the ensuing years, the impact of technology on financial advising has only grown. Whether it’s the proliferation of online financial information, online brokerages, or the advent of the robo-advisors, financial advisors have faced continual pressure to evolve in the face of a rapidly shifting competitive environment.

Here, we will cover just a few ways in which the landscape of financial advising is changing - and how you can stay ahead.

The New Customer

One of the major trends shaping financial advising today is the evolving profile of financial advising clients.

The first shift is generational. The Millennial generation is becoming increasingly prominent in the market for financial advice. Millennials are growing their share of American wealth, and are poised to inherit ~$68 trillion from baby boomers. Right now, however, only 21% of Millennials say they primarily use a financial advisor to manage their wealth.

Willingness to seek financial advice has grown, however. In 2016, less than 50% of millennials said they saw a need to use a financial professional. In 2020, that number was over 75%. Over the next several decades, financial advisors looking to grow their business will increasingly live or die based on their ability to appeal to this generation.

The coming decade will also be driven by other demographic shifts. A recent report identifies women and “hybrid” investors as 2 particularly high-growth segments of financial advisory clients.

The increasing importance of women as clients of financial advisory is well-documented. Women have long been poorly served by financial advisors, and control an increasing share of US household assets. Women are also increasingly making financial and investment decisions for households.

The growth of “hybrid” investors is another important trend. “Hybrid” investors refer to investors that maintain their own private investment accounts in addition to accounts managed directly by an advisor. As the internet and online brokerages have increasingly democratized investing and financial advice, advisors must prepare for a future in which a growing number of clients choose to manage at least part of their portfolio by themselves.

The Importance of Technology

Perhaps the most significant change – and challenge – facing financial advisors today is the increasing demands of clients for technological tools and solutions that help them manage their finances and interact with their advisors

A recent survey found that investors prefer for most interactions with their advisor (such as opening an account, moving money, or servicing an account) to take place on a company website or app. When it came to managing their portfolio and receiving financial advice, 38% preferred using a company website or app, compared to just 28% who preferred an in-person meeting. Another survey found that while 49% of investors put a “simple, intuitive digital experience” as their top priority, only about 18% were “very satisfied” with their current advisor’s digital experience.

In the coming decades, integrating technology into financial advisory is likely to become still more critical to success – as the expectations of existing customers increase and new generations enter the fold. Staying ahead of technological changes, and providing a seamless digital experience for clients, will be critical.

Conclusion

Over the next decade, the role of the financial advisor – and their clients – will continue to evolve, and advisors that are able to adapt and meet the changing demands of their clients will be well-positioned to capitalize on these trends and grow their business. By adapting to, rather than resisting, new technologies and changing customer demands, financial advisors can remain an integral part of their clients’ financial lives for years to come.