Mark Tibergien says there's a fairly straightforward way for financial advisors to both improve their business and that of the broader industry, while getting more Americans to improve their financial health: Boost financial literacy.
The CEO of Pershing Advisor Solutions made his case during the company's INSITE gathering in Hollywood, Fla., in June. "I want to appeal to you about something that can transform" our society, said Tibergien, "since we know that financial illiteracy is rampant."
The advisor guru explained that today's young adults do not get exposure to basic financial issues in high school and are simply "not prepared to deal with credit cards, banking, etc." Many individuals today "are in dire straits, once again," Tibergien explained, "and at its core are many of the factors that contributed to financial meltdown in '08," such as large levels of debt and the use of risky financial products.
At the same time, he notes, the level of trust in banks and financial institutions is very low, and the industry is unable to attract the talent it needs to thrive. That raises the question, he says, "Is there a correlation between the level of financial literacy, the reputation of the industry and its lack of appeal to those looking at this work?"
As today's advisors retire, the field will need about 230,000 replacements. Tibergien argued that boosting financial literacy would improve the industry's overall image and its recruiting appeal.
Positive Outlook
Despite these challenges, many advisors say they are enjoying greater success today than ever. In Pershing's second-annual survey, released at INSITE, 38% of advisors said their business was doing "better than ever," up from 31% a year ago.
By channel, RIAs feel strongest about their success: 41% view their practices as having robust momentum vs. 35% for wirehouse reps and 39% for other advisors. In fact, among advisors with wirehouse and regional firms, the biggest number—39%—say their practices are "regaining the momentum we once had," which could reflect the impact that the financial crisis, related mergers and acquisitions and regulatory fallout had on certain firms in this industry channel.
"The No. 1 driver of rising satisfaction among advisors is the impact they have on the lives of their clients," said Kim Dellarocca, managing director at Pershing, in an interview. "This trumps financial gain."
In the latest poll, 71% of advisors say that helping clients meet their financial goals is the most rewarding aspect of being an advisor, up from 66% a year ago. (The study includes the views of 365 FAs.)
While they may be upbeat, advisors also need to find ways to improve how and when they interact with clients. A high number of advisors reach out to clients by phone when their investments go down, 68%, or the markets go down, 58%, while only 39% call when the markets go up.
Likewise, 33% of reps will schedule face-to-face meetings with clients when investments go down vs. 21% when these same investments go up. "Advisors often call clients around negative news and miss opportunities to call about great news," said Dellarocca. "If advisors contact clients regularly about positive news, other calls will be less awkward."
The study finds that 53% of advisors plan to increase their use of social media in the next few years. Just 4% say they strongly agree with the statement, "I actively use social media to manage my personal brand."
Before posting on Twitter, LinkedIn or Facebook, it is helpful for advisors to ask why someone would like the post, Dellarocca said. "Does it inspire? Is it interesting? Would someone be likely to forward this information or quote?" If the answer isn't yes, she added, the information being shared may not increase an advisor's "social capital."
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