U.S. financial professionals expect their assets under management to increase by 7.2% over the next 12 months, with annualized growth of 17.2% over the next three years, Natixis Investment Managers reported Monday.

Nine in 10 advisors think this growth will be driven by new assets from new clients, and four in five say it will be driven by new assets from current clients. Only 55% are counting on market returns as a primary growth driver.

These findings were based on a survey of 300 U.S. financial professionals with $29 billion in assets, who were one segment of a global survey conducted by CoreData Research between March 16 and April 24 among 2,700 wirehouse advisors, RIAs and independent broker-dealers with $135 billion in client assets in 16 countries and territories. 

Other findings from this survey were published June 16.

Despite their optimism for their practices, 84% of U.S. financial advisors acknowledged that business development was a challenge. Consider that in a typical work week, they dedicate a mere 9% of their time to prospecting for new clients.

Fifty-one percent of their time is spent meeting or communicating with current clients, 15% is divided between investing or reallocating client investments and 23% is devoted to general administration, marketing, compliance and education/reading/social media.

How, then, to grow their practices? The skills advisors said they most needed to improve on were:

  • Getting to know clients’ next-generation heirs – 53%
  • Preventing clients from making emotional investment decisions – 46%
  • Demonstrating value beyond portfolio construction – 41%
  • Managing client return expectations – 37%
  • Communicating with clients – 28%

Asked why investors would leave their financial advisors, 69% of respondents cited failure to communicate with clients in a way they expected, and 64% said not listening to clients.

Only 27% put client departures down to a failure to meet their return expectations.

“Advisors are adapting their business to align with anticipated growth opportunities, and the path to profitable growth isn’t likely to follow the status quo,” Dave Goodsell, executive director of Natixis’ center for investor insight, said in a statement.

“To win assets, advisors need a keen understanding of how clients’ needs and expectations are evolving. At the same time, one of the most important roles for advisors is setting realistic expectations for their clients, and more actively planning to reach the goals of both the client and their next generation heirs.”

Planner, Financial Coach, Therapist

In the past, financial professionals succeeded by putting themselves forward as experts at selecting investments and managing client portfolios.

Today, the survey’s findings suggest, they are reframing their value propositions as clients seek a wider array of investment and non-investment-related services.

Sixty-one percent of U.S. advisors surveyed said that over the past year, they had seen increased demand for planning, especially for retirement income and planning.

Other services they said clients wanted more of were estate planning, tax-efficient investment and wealth structuring strategies, lending and credit solutions and help with financial education for other family members and heirs.

Seventy-two percent of respondents said they now viewed themselves as planners whose primary role was to help clients navigate all their financial needs, not just their investment portfolios.

Fifty-nine percent described themselves as a financial coach, and 44% saw themselves more of a therapist by helping clients understand their relationship with money and the emotional drivers of investment decision-making.

Just 35% identified themselves primarily as a portfolio architect.

Advisors Up Their Game 

Sixty percent of advisors in the survey said their main source of competition at present was other traditional financial professionals, while 18% said it was the availability of improved tools for self-directed investing and 9% cited automated advice platforms.

However, they recognized that change was afoot in the industry.

Twenty-five percent said that in five years, they expected incoming competition from traditional financial professionals, and another 25% said it would come from new entrants, such as big technology companies and other innovators within and outside the financial industry. Twenty-four percent cited self-directed investing tools and 23% automated advice platforms.

To best position themselves, financial professionals are focused on differentiating their practices through amplified client service techniques and strengthening the longevity of their existing client relationships.

Some three in five respondents said a hallmark of the most successful advisor-client relationships were knowing clients on a personal level and communicating regularly. Two in five said building relationships with clients’ families was a hallmark of success.

As they continue working to improve client service, advisors are seeking greater efficiency in their practice:

  • Leveraging technology, such as relationship management tools – 51%
  • Streamlining their client base – 46%
  • Segmenting clients, by age or wealth level, for example – 40%
  • Specializing in niche client groups, such as doctors and divorced people – 36%

Investing Strategy

Nearly all U.S. advisors surveyed said that rather than build all their clients’ investment portfolios from scratch, they invested at least a portion of their clients’ assets in model portfolios designed to achieve an expected return with corresponding risk.

Two-thirds of model portfolio users said they did so because it made scaling their own business easier. Other benefits they cited included making client reviews more efficient, lowering administrative burdens, increasing time available to serve current and prospective clients and accessing investment expertise.

“Investing involves a balance of efficiency, creativity and consistency, and that’s what we are seeing as more advisors incorporate a mix of model portfolios and customized or alternative strategies into client portfolios,” Marina Gross, executive vice president at Natixis Investment Managers Solutions, said in the statement.

In terms of asset allocation, 79% of surveyed advisors allocated a portion of client assets to alternative investments, 68% of these relying on real estate strategies.

Advisors who used models had an average 55% of their book of business in their own models, 24% in their firm’s proprietary model portfolios and 21% in external or third-party asset manager models.

Faced with market uncertainty and continuing volatility, 81% of financial professionals said the current market was favorable for active portfolios, with an average 68% of client assets in actively managed investments. Two-thirds said they intended to maintain a high level of active exposure over the next three years.

Seventy-one percent of advisors each believed active management added the greatest value to less covered asset classes, such as small-cap equity funds, and to emerging market funds. Roughly half each said active management added value to bond funds, alternatives and large-cap stocks.

— Check out Advisors Expect Returns More Like 2018 Than 2008: Survey on ThinkAdvisor.