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The Advisor as Tech Guru, Educator, Full-Service Consultant

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It’s no secret that the wealth management industry is in the throes of profound transformation. Confronted with potential upheaval, advisors are starting to reimagine who they are and how they work. In the next decade, the primary drivers of change will compel advisors to occupy three key roles: Technology guru, educator and full-service consultant. These roles will help advisors deliver client value and shore up a competitive advantage.

Drivers of Change

Rapidly shifting conditions are forcing advisors to adapt quickly and fight for survival: 

Changing demographics.Over the next 20 years, millennials will inherit nearly $30 trillion in generational wealth. This is a big deal because millennials represent a different breed of investor altogether. Doing business in the office, face-to-face, isn’t their cup of tea. They tend to be extremely confident, mostly because they have access to almost limitless information. As a consequence, they tend not to lean on advisors to confirm their gut, boost their confidence or soothe their anxiety in a bear market.

New regulations. Most of the regulatory talk over the past 18 months has centered on the DOL fiduciary rule, currently in limbo. Will the new administration enforce the rule or not? But the fact is: Regulators are merely catching up with industry trends. Successful advisors recognize that fee-based or, increasingly, fee-only compensation is good for business. It’s what clients want, especially in an environment marked by near-perfect information symmetry. Fee-only compensation is transparent, helps eliminate conflicts of interest and advisors can advertise that they don’t work on commission.

Digital transformation.Algorithm-based portfolio balancing (robo-advising) is now ubiquitous across the industry. And disruptive startups are finding ways to leverage advanced analytics via machine learning and artificial intelligence. Many advisors genuinely worry they’ll be replaced by computers and automation.  

At the same time, new technologies have transformed the marketplace, changing the way investment products are priced, bought and sold. New trading platforms and the rise of fintech underwrite immense competitive pressure. Greater transparency and comparison pricing drives management fees and commissions ever lower. Margins are incredibly thin. To stay afloat, advisors work overtime, scrambling to bring new assets under management.  

Three Ways Advisor Roles Are Changing

Taken together, the picture can indeed seem daunting. But, in the wake of tremendous change, the key is to think about who you are and what you do best.

Role #1: Advisor as technology guru.Robo-advice alone will not serve investors well, neither now nor in the future. But robo-advice coupled with human expertise and intelligence will. New technologies represent valuable tools advisors can employ to deliver a more robust client experience. Already advisors are building mobile, virtual offices, in which they can meet clients anytime, anywhere. New platforms will facilitate meaningful interaction and engagement. Advisors can demonstrate expertise by helping investors access and navigate increasingly complex analytic tools, helping them discern relevant insight and purpose.

Role #2: Advisor as educator. Experts across the industry recognize that some — perhaps most — millennials simply don’t have the financial literacy their parents did. Accordingly, advisors will need to help clients learn how to use the ever-expanding library of tools and resources available to them. In addition, advisors will need to guide investors through the tough questions — questions computers will never be able to answer.

Consider that environmental, social, and corporate governance (ESG) investing is on the rise, most prominently among millennials. Although generating a return on investment is the goal, millennials also believe they should be socially conscientious with their investments. Advanced technologies can forecast trends, locate arbitrage, identify value and so on, but they can never discern the most ethically prudent way to employ investment resources to make the world a better place. Advisors will increasingly be called to serve as ethical stewards of the world, working with investors to think about how to make the biggest impact with their resources, an impact that extends well beyond the bottom line.

Role #3: Advisor as full-service consultant. New technologies and platforms are displacing the need for specialization. In the very near future, self-service investing will be standard. Anything an expert can do, a mobile app will do, too. As a consequence, a role reversal is on the horizon. Successful advisors must be comprehensive — not specialized — in their approach. In other words, as fragmented technologies fill niche markets, investors will need advisors who can help them strategize the big picture.

This means advisors will have to build a larger network of partners who can deliver exactly what their clients are looking for. And advisors will have to be fluent in financial concerns across the spectrum: insurance products, equities, managed funds, alternate investment products, crowdsourced investments, etc. In addition, advisors will need to assemble a stable of student debt experts, tax experts, estate planners and more. Advisors will rely on technologies to aggregate information into a comprehensive, 360-degree picture of each client’s total assets and liabilities, spending habits, consumer habits, life goals, career objectives and the like. The idea is that advisors can deliver value by threading together a comprehensive suite of services that make the average investor feel like a VIP.

Ultimately, immense pressure generates evolution. Advisors aren’t going anywhere and will be needed more than ever. But their roles are changing — and, we believe, for the better. Despite the present turbulence, the future is flush with opportunity. 

— Read To Connect With Tomorrow’s Clients, Focus on Closing the Industry’s Gender Gap Today on ThinkAdvisor. 


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