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Financial Planning > College Planning

The Ever-Evolving Financial Advisor

By Mark Elzweig

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Back in the 1980s, when I was starting out, stock brokers had a secret weapon — Quotron machines displaying the most recent stock ticker prices. Knowledge was power for the most skilled advisors, many of them 20-something-year-olds who had come from sales training programs at places like IBM and Xerox.

Today, financial advisors bristle at the term broker. Today’s “beginners” are often twice as old and prefer to think of themselves as consultants, not mere salespeople.

Thanks to the internet, anyone can find a stock price or invest cheaply with ETF funds. And now so-called robo-advisors offer strategic investing ideas based on age and goals, making some wonder whether the profession itself is headed for the ashbin of history. Where once the profession evolved, is it now dissolving?

“Before the argument was that the internet would kill FAs, now it’s that robos will. Both are false,” said Michael Kitces, publisher of the blog “The Nerd’s Eye View” and partner of Pinnacle Advisory Group.

Advances in technology will continue to enable advisors to service clients more efficiently.

“Imagine if it took advisors only five minutes to open an account, 10 minutes to rebalance and no time at all for quarterly reports because all the information was available online. How much time would advisors save in one year or even five years?” asked Kitces.

Evolution remains the byword for advisors. Today, they are holistic financial planners who help clients prepare for retirement, create college savings programs and even do household budget projections. They have a long menu of products and services to help clients implement their programs, including insurance and lending services.

The Super Advisor

“Clients want one-stop shopping,” said Michael Silver, managing partner of Focus Partners, a practice management consultancy for financial advisors and financial service firms.

One-stop shopping has an added benefit: Industry studies reveal that clients are more loyal to FAs who offer a more complex array of products, Silver points out. In sales lingo, those clients are stickier. “Advisors should want to create a stickiness factor,” he said.

Focusing on goals has another advantage: Investment performance is no longer the focal point. Client meetings center around financial planning needs that take into account a client’s shifting life circumstances, including inheritance, buyouts and expenses tied to children.

Therefore, advisors in client meetings should always ask this question, Silver said: “Is there anything going on in your financial life that I need to know about?” It’s all part of how successful advisors position themselves as indispensable in their clients’ financial lives, he explains.

Advisors these days strive to build multi-generational client relationships and often prefer fewer but bigger clients, he explains.

Going forward, advisors should be gravitating toward more and more specialization, according to Kitces, which is a natural evolution. He notes that the advisor’s business model has evolved from stock-picker to asset manager to financial planner. Advisors have always been scrambling to stay one step ahead of technology and what clients can do themselves with technology.

“The next 20 years will be an age of niches and specialization,” explained Kitces. From 2000 until now, the number of advisors seeking the Certified Financial Planner certification grew from under 40,000 to almost 80,000.

Today, the CFP designation alone doesn’t make an advisor stand out. To make that happen, many are seeking post-CFP designations, like the Retirement Income Certified Professional (or RICP) offered by the American College of Financial Planning.

Niche practices abound. Some advisors specialize in pre- and post-retirees, women going through divorce, or individuals who have received buyouts or have specific occupations. Kitces cites a practice that serves only employees from two federal agencies who are stationed overseas and a $2 billion RIA with clients who are mainly retirees from a public utility.

Advisors are a nimble bunch and will continue to offer clients more broad-based services that are targeted toward their particular needs. This means more value for clients and stickier relationships for advisors.

Today, no one machine — neither a Quotron nor a robo — can fully serve clients. Successful advisors understand how the world has changed and are anticipating what lies ahead.

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