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Technology > Marketing Technology

8 ways financial planners can beat their competitors

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Changes in demographics, technology and markets are influencing the way financial advisors interact with their clients, according to a new white paper from SEI.

These changes are affecting every aspect of the industry and forcing advisors to deliver advice in different ways.

“Financial planning is in the midst of a generational shift, among both financial planners themselves and the clients they serve,” Michael Kitces, head of research at a private wealth management firm and co-author of the white paper, said in a statement.

“Coupled with the accelerating pace of technology change, this transition period provides advisors the opportunity to take their practice to the next level, but also presents the risk of falling dangerously behind the curve.”

The paper points to several key drivers of change within the financial advisor sector.

Some two-thirds of financial advisors classify themselves as financial planners or wealth managers, while analysis of advisory firms often shows that they are not. Only 26 percent offer services that meet the definitions of those classifications, according to the paper.

It calls for true wealth managers to clearly communicate the higher level of service they offer clients and what makes them more than a traditional investment manager.

The authors note that 64 percent of the American population was born after 1964, and tomorrow’s successful advisors will serve clients who are technologically savvy and diverse in terms of gender, age, ethnicity and aspirations.

Goals-based planning is on the rise, they write, but advisors need to be prepared to report on progress to goals instead of investment benchmarks. Investment-only advisors, employing a passive investment approach, are at risk in today’s market.

The paper says that the rapidly emerging number and type of technology-enabled tools available to advisors — aggregation, mobile, cloud — are outpacing their adoption.

Investors across all socio-demographic segments are way ahead of their advisors with their technology know-how. What used to be done by pen and paper can now be done with financial planning software — yet 29 percent of financial advisors still don’t use the software.

The paper suggests that future investors will likely require a mix of robo-advisor strategies along with more personalized human service.

What advisors can do

The white paper lays out eight ways for advisors to think about their service delivery model and gain a competitive advantage in the evolving advice landscape:


1. Co-plan with clients

This will force advisors to rethink their client relationships and their role. They should move away from selling product and become a co-creator of interactive plans that are unique for every client. They should expand the client conversation beyond finances and investing.

2. Fully adopt goals-based planning

The paper suggests that advisors lead client conversations toward personal and financial goal achievement vs. benchmarks. The client relationship is not just about money; it’s about planning around people’s lives.

3. Hone the value proposition

Advisors should identify their target audience and the financial and other services they need. They should provide services that are hard for competitors to emulate, and develop multiple, complementary segments to diversity their client base and help reduce risk. In addition, they should use technology to compete nationally, and use active management to add value.

4. Age-diversify the firm

Larger firms with an eye toward the future should capture the opportunity that the coming of younger investors presents. They should implement an age-diversified model to serve multiple generations within a family, and attract younger clients whom they can continue to serve as they age and their portfolios mature. Hiring younger advisors can be an effective succession strategy.


5. Operationalize financial planning

Advisors should develop a consistent way to track clients’ progress relative to their goals and the plans they have collaboratively developed. As well, they should enhance workflow and obtain metrics to measure their efficiency. And they should move from an asset management process to a financial planning one.

6. Assess your fees

While the industry is at a crossroads in terms of the direction of fees, advisors should prepare for a possible shift. They can leave their fees in place for now, but should differentiate their services and identify how those services could be charged separately. They should also ensure their firm’s pricing and value proposition are aligned and consistently administered.


7. Become a techno-advisor

If advisors don’t keep up with their clients when it comes to technology, they’ll be left behind. To avoid this, they should review their client portal to ensure it supports collaboration, and let clients decide how, when and where they want to interact.

8. Outsource

Advisors should outsource everything except the client relationship and value proposition, and focus exclusively on the human connection to differentiate their services. As technology continues to deliver new and more effective ways to run the business and engage with clients, the role of outsourcing becomes paramount to their success.


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