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How are advisors equipped to serve the new breed of investor?

To see how much financial advisors' roles have changed, we surveyed 652 advisors in North America.

Kendra Thompson
Wealth Management Services, North America Lead

What was the most significant finding from the survey?

Across 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 than older advisors to:

  • Have clients question their fees (40 percent versus 23 percent)

  • Be asked for information about investing strategies in use, including ways for clients to invest on their own (57 percent versus 37 percent)

  • Be asked to provide advanced digital tools their firm doesn’t have (52 percent versus 20 percent)

  • Use social media with their clients (74 percent versus 59 percent)

  • See online investment managers as a threat to their business (29 percent versus 15 percent)

How are digital tools and channels changing the game?
More than three-quarters of the advisors we surveyed say that investor demand for digital is increasing and 75 percent say this trend will be stronger in the next five years.

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.

Here’s where the generation gap comes into play though: among those who have tenure of 10 years or less, 74 percent use social media with clients, with 81 percent of those using Facebook and 61 percent using LinkedIn. However, among those with 10 or more years of tenure, only 59 percent use social media with clients. Interestingly, the older advisors are more likely to use LinkedIn than Facebook (78 percent to 61 percent).

How is the client experience changing?
Clients are becoming more knowledgeable and more confident as investors, with 88 percent of advisors saying clients are better informed and 54 percent saying they have become more active in decision-making.

With questions about advice come questions about fees; 32 percent of advisors overall, and 40 percent of those with less than 10 years’ tenure, said investors question their fees.

Investors are also asking advisors for information and research the advisor or the firm does not routinely provide, with nearly half of advisors receiving such requests.

We believe this trend toward greater client engagement and requests for more research and information will continue and may accelerate.

Did the survey reveal anything about financial planning?
Of the advisors we surveyed, 54 percent say they have developed financial plans with their clients, and, of these, 64 percent are monitored for performance to plan. Performance-to-plan tracking is more common among longer-tenured financial advisors, with 71 percent reporting such monitoring.

It’s important to note, clients are beginning to ask advisors for digital tools. In many cases, their firms do not provide these tools. The most successful advisors, that is those with the highest AUM, also identify themselves as being most in need of these tools, particularly financial planning tools.

How do advisors grade their performance?
Financial advisors’ performance is measured primarily on AUM or net new assets, but some new criteria for performance measurement are being introduced. Fully 60 percent of advisors and 70 percent at large firms consider themselves to be top performers, but only 56 percent feel that their firms measure their performance effectively. Similarly, 57 percent feel their firm provides appropriate incentives for performance.

How can wealth management firms respond?
Wealth management firms have the opportunity to attract extensive new assets through intergenerational wealth transfer and the shifts of funds that follow inheritances. 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 not all clients are alike. There are major differences between older and younger clients.

  • 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.

  • Evaluate the skills, talent and training needed to be a good financial advisor.

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