Despite all the research reports, surveys and conference panels urging financial advisors to offer comprehensive, customized services and adopt new technologies, few advisors are changing the ways they do business, according to a new joint study from SEI and the Financial Planning Association.
Most financial advisors aren’t segmenting clients, planning for the next five to 10 years, differentiating their services from one another or focusing on millennials and Gen Xers even though their populations are growing while the number of boomers and members of the silent generation are declining.
The study, “Advisory Firms in 2030: The Innovation Imperative,” surveyed 436 financial planners, most holding a certified financial planner designation and about half with 10 years experience in the business or less, plus 686 self-directed investors working with financial planners, though not the same planners that were surveyed. The investors surveyed had investable assets over $100,000 and half had assets between $250,000 and just under $1 million.
“If we look out 10 years, the industry will change dramatically … become more consumer- and technology-driven, but most advisors are not anticipating or planning for that change,” John Anderson, managing director of Practice Management Solutions at SEI, tells ThinkAdvisor. “We are an industry focused on what it’s doing today and not planning on what’s going to happen tomorrow.”
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When asked about their future plans over the next five to 10 years, less than one-quarter of the advisors surveyed said they expected to adapt to changing client needs — “a very troubling figure,” according to the study — although 42% expect they will customize client services based on specific needs of clients.
The study also found that 55% of advisors surveyed have no business plan in place, and two-thirds meet with clients in their offices while only 9% meet clients virtually.
“Consumer demands keep growing, and technology keeps evolving,” according to the study. The profession needs “to get ahead of what’s next and create meaningful ways to engage with clients on their terms. Those who can will likely thrive. The rest may get left behind.”
To avoid getting left behind, the study offers several recommendations for advisors:
- Start thinking in time horizons beyond 12 months. Will your value proposition survive the next 10 years, and how can you differentiate your business? Also, if growing assets under management is your most important goal, think creatively about how to achieve that.
- Segment clients to anticipate their future needs, identify at least one niche/market segment in which you’ve been effective and consider new ways to attract clients, including those that fit that niche.
- Schedule two full days to build a framework for a 10-year strategic plan. Consider whether to shift from being a generalist to a specialist as well as ways to attract younger clients — and serve multi-generational families — and to anticipate clients’ appetite for more personalization.
- Listen more to clients. Consider developing a client advisory board that focuses on client needs and includes at least one millennial. Ask clients what they appreciate most about other service providers they routinely patronize.
- Audit and assess technology needs. Assess gaps in your technology suite and what’s needed to achieve scale. Try new technologies with all clients in mind and ask clients about tools, and incorporate your tech plan into your strategic plan, allocating the investment needed.
One quarter of the advisors surveyed said that adopting the best new financial technology was a top business goal over the next five to 10 years, and half said they preferred a single, integrated platform with minimal integration of outside systems.