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Four factors for consultants to consider in 2022

Few industries have faced as many changes recently as the financial advisory industry. These developments are driven by a number of factors including changing customer expectations, new technology, changing demographic trends and significant regulatory changes.

These trends present both challenges and opportunities for financial advisors and raise the question: How will you grow your business and increase your profitability in 2022? Now is the time to be proactive and plan how you will position your firm to take advantage of these emerging opportunities.

Changing Client Expectations: Becoming a Holistic Consultant

In 2022 and onwards, clients will expect more from their financial advisor than just managing their investment portfolio. They want more holistic advice and an advisor who understands their overall financial well being. They expect their advisors to help them with a wide range of different areas, including financial management, debt planning, tax preparation, and estate planning.

This requires a more holistic look at clients’ overall balance sheets so that you can provide a comprehensive level of service that focuses on the client’s overall financial well-being, not just their investments. Your focus should be on providing comprehensive, holistic advice, delivered with excellent, highly personalized service.

Providing holistic financial services requires comprehensive guidance, products and services that go beyond mere investing. This requires access to an expanded suite of products and services, including banking, lending, tax planning and estate planning.

Becoming a holistic financial advisor can have many benefits for your firm. For example, it can help you improve customer retention, increase revenue by cross-selling more products and services, differentiate yourself from the competition, and give your customers a more comprehensive, well-meaning advice.

New Technology: The Digital Revolution

The digital revolution is having a tremendous impact on the financial advisory industry. Consultants and their clients are embracing new ways of working together as a result of the pandemic – and that trend is here to stay. Digital adoption by advisors and investors has accelerated as today’s clients become more tech-savvy. They are expected to take a more active role in their own finances by using apps and other technology in 2022.

For example, by using digital technology, customers expect to receive advice and information much faster. However, a virtual relationship is not a complete substitute for a personal relationship with their advisor. According to new position of adviceIn a study conducted by Accenture, only 17% of clients prefer a full digital relationship with their financial advisor.

Given this, consultants need to find the right balance between offering services digitally and in person. Both can be used effectively at the right time – the key will be learning how to understand and meet the virtual and personal needs of your customers.

Robo advice platforms are expected to be commonly used by advisors in one capacity or another in 2022. These platforms may be able to execute sophisticated investment strategies that use artificial intelligence to make informed buying and selling decisions based on the risk tolerance and time horizon of the clients. , In addition to investment management, robo-advising platforms can also help with tasks such as onboarding on a new account, risk profiling, tax-loss harvesting and account rebalancing.

Changing demographic trends: generational wealth transfer

The largest wealth transfer in history is going to happen in the next few decades when Baby Boomers transfer an estimated $68 trillion to Millennials and members of Generation X. Have you thought about what will happen to your Baby Boomer customers’ assets when they relocate. to his successors?

Studies have shown that 66% to 95% of adult children do not keep their parents’ financial advisor after inheriting their assets. This makes it important to start building relationships with the adult children of your Baby Boomer clients now. However, in a survey conducted by MFS Investment Management, 75% of responding investors said that their advisor had never met their adult children.

This makes it important to define and focus on your value proposition, especially when it comes to what young clients expect from their financial advisor. For example, many of these young clients want to work with an advisor who can help them with environmental, social and governance (ESG), socially responsible investing (SRI), and cryptocurrency investment strategies.

According to Accenture, Generation Z (80%) and Millennial (63%) investors are more than twice as likely to ask their advisor about ESG investing than Baby Boomers (27%). Also, 95% of Generation Z and 83% of Millennial customers would consider money products and services offered by Google, Apple or Facebook, compared to only 30% of Baby Boomer customers.

A new regulatory environment: fiduciary rules

The Labor Department’s proposed fiduciary rule was vacated in 2018, but its impact is felt in the financial advisory industry. Due to the regulation generated by the attention and publicity, many consultants have changed their business practices and become fiduciary by avoiding the presence of any conflicts of interest with their clients.

If you already have a fiduciary, such as an RIA, there is an opportunity for you to use your designation to differentiate your firm from your competitors. If you are not a fiduciary, now may be a good time to consider shifting your business to a fiduciary model.

start planning now

The role of financial advisor will be crucial for the investment success of clients in 2022. But change is inevitable, and how you respond to it will determine your level of success. Take some time now to think about how these and other developments could affect the future of your business and start planning accordingly. Doing so allows you to take a leap over your competitors and position your firm for long-term success.

Mike Watson is SVP, Head of RIA Custody at Exos Advisor Services

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