At first glance, it looks like financial advisors have it made. Demand is growing for their services while the supply of advisors is falling due to retirement. The Bureau of Labor Statistics forecast a 27 percent increase in financial advisor jobs through 2022 — more than twice the growth of employment overall.
But dig a little deeper and the outlook is not so rosy. There’s the proliferation of robo-advisors, millennials who want advice but don’t have a large chunk of investable assets, a shortage of new talent, a rush of new technology that adds efficiencies but takes some adjustment, and increasingly, more consolidation.
“Change is happening at a very rapid rate,” says Brian Leitner, vice president of practice management for Mariner Wealth Advisors, an independent, multi-service financial advisory firm. “There’s a lot to tackle all at once.”
Leitner was part of a panel on the future of financial advice at last week’s Morningstar ETF conference, along with Jim Crowley, who oversees Pershing’s broker-dealer business, and Vincent Tiseo, global head of business practices at Goldman Sachs Asset Management. Morningstar’s Tricia Rothschild moderated the panel.
All three panelists agreed that advisors today need to focus on the value proposition of their business — what they charge for the services they provide — in order to retain and grow their client base, which will also help if they want to sell their practice in the future.
That “value proposition has traditionally been driven by amount of assets clients to bring to the table, but it really should be driven by the value we [the advisor] brings to the table,” Crowley said.
Here are some of the key themes advisors need to consider, according to the panel:
1. What services you provide and what you should you add.
If your focus is financial planning and investments, should you add tax and trust services or stick with your current mix? “Decide where you are today and where you want to get to,” said Leitner, whose firm is structured around being a one-stop shop for clients, offering accounting and legal services in addition to investment advice.
Tiseo of Goldman Sachs suggested that advisors focus on “two or three core needs of clients,” then make incremental changes, to grow along with clients’ changing needs. “You have to deliver on investment side, then on service level, then on the relationship level,” he said.
2. Align your fees with your services.
“If your fee structure is 1 percent and your asset management fee is 25 basis points, what are you doing for the other 75 basis points?” asked Leitner, who sees the industry moving to flat fees. In addition to percent of assets under management and flat fees, advisors might want to consider hourly fees, which may appeal to clients who don’t have a large amount of investable assets.
At the same time, noted Tiseo, “Clients are willing to pay for good advice, older and younger.” Crowley said he’s even seen wealth managers increase pricing, based on the value to their client.
3. Attract millennials as employees.
“You need millennials to relate to millennial clients,” Crowley said. The key is adopting strategies to attract millennial employees.
To that end, Pershing has started a reverse mentoring program where he meets with millennial employees every other week and, said Crowley, “They mentor me.” Pershing has also handed over the firm’s employee engagement program to two of its youngest staff members, who “came up with ideas I would never have,” he said.