Efficiency and scale continue to be financial advisors’ top priorities, according to a new study from Federated Hermes, an active investment manager.
Eighty-five percent of advisors in the study reported that technology has increased their businesses’ efficiency, up from 76% who said this two years ago.
Still, referrals and personal communication remain the top drivers of client growth, the study found. Some 70% of advisors said they work in teams, with a majority focused on leveraging technology to expand their reach.
For its study, Federated Hermes polled 271 advisors across the United States, each with at least $300 million in client assets under management.
Cautious Optimism for AI
Survey participants expressed both enthusiasm and caution around artificial intelligence. Nine in 10 said they expect to implement AI into their workflows within the next year, citing general business efficiency gains, client communication improvements and back-office automation as key benefits.
At the same time, 63% of respondents highlighted potential errors from AI agents, and 58% flagged compliance and regulatory risk.
Advisors ranked AI integration among the top areas where they seek support and guidance from asset managers, signaling the industry’s desire for practical, responsible pathways to adoption, Federated Hermes said.
The study also found that portfolio construction trends are shifting. For the first time, exchange-traded funds account for nearly the same share of client assets as mutual funds, at 24.2% and 24.7%.
Mutual fund allocations have steadily declined from about 39% in 2022, while ETF adoption has remained stable or has grown. Alternatives are also gaining traction, with 70% of RIAs and 81% of larger RIA consolidator firms reporting that they are open to incorporating them for diversification, return potential and risk management.
Advisors acknowledged, however, that challenges in execution and sourcing remain barriers, suggesting opportunities for product innovation and education.
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