The role of the wealth management advisor has changed dramatically in recent years. As clients gain access to more sources of information and more analytical tools, as well as options for automated, lower-fee platforms, advisors are under pressure not only to lower their fees, but to provide clients with even more ways to plan and direct their own financial future.
How are advisors equipped to serve this new breed of investor?
To see how much financial advisors’ roles have changed—and how their own views have changed—we surveyed 652 financial advisors in the United States and Canada. As clients gain access to more sources of information, advisors are under pressure to lower their fees.
Generation GapAcross many parts of the survey, the results find interesting differences in the replies from “younger” (less than 10 years of experience) and “older” advisors (10+ years of experience). Younger advisors are more likely to:
Have clients question their fees
Be asked to provide advanced digital tools their firm doesn’t have
Use social media with their clients
Digital Tools and ChannelsYounger advisors—and those advisors with large Assets Under Management (AUM) responsibilities—are more likely to use digital for activities such as account planning and review, ad-hoc requests and client meetings. But the use of social media has become mainstream, with nearly two-thirds (64 percent) of respondents agreeing that social media has become a significant and/or acceptable way of interacting with clients, and 62 percent saying that they themselves use social media to communicate with clients.
Pressure on the Value PropositionOnly about one-third of advisors (34 percent) have found themselves serving more clients with lower AUM, but there is a big difference in terms of advisor tenure. Advisors with 10 or fewer years of tenure report a decrease of 19 percent in average AUM per client, while those with 10 years or more report an increase of 18 percent.
Wealth management firms must adapt quickly or risk becoming irrelevant to their clients. To retain and grow existing assets while gaining a larger share of assets that are “up for grabs,” firms should consider five key principles:
Recognize that all clients are not alike. Firms need to provide their younger advisors (and hence their younger clients) with access to digital tools designed to improve and monitor performance.
Equip advisors with the full digital toolkit. Firms should ensure that advisors have access to the digital tools that clients have come to expect, including communication via social media.
Advisors and clients should plan together. Advisors should be equipped with the latest innovations in performance monitoring and analytics for performance improvement.
Provide proactive, structured succession and inheritance training programs. All wealth management firms should provide mandatory training and guidance in how to transfer accounts when an advisor retires or leaves the firm, and in how to work both with clients and their prospective heirs to increase the likelihood that the heir will remain a client after the assets transfer from one generation to the next
Evaluate the skills, talent and training needed to be a good financial advisor. Firms should be investing in analytics and other tools needed to determine the characteristics of successful financial advisors in this new environment, and then undertake the recruiting, training and performance management initiatives to create this new model.
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