Future of financial advice - what every advisor should know
Everything is changing. The way advisors work, the way they give advice, the way they earn revenue, and even what clients want from their advisors.
We think about the future a lot here at Wealthbit. We talk with many advisors and industry leaders about the future of the financial advice industry. It’s one of our favorite things to do. We also see it as part of our mission to make sure we get financial advisors into the future in a way that is easy and streamlined.
We’ve put together a list of the most important things every financial advisor should know about the future of the financial advice industry if they want to keep up, of course.
Here are the 7 things you should know about the future of financial advice
1. Advisors have to match their clients’ expectations of customer service.
Clients are getting used to great customer service.
They are comparing advice services with other great experiences they receive from non-financial companies.
Every single experience a person has, influences their expectations in some way. When you look at the world around you, it’s easy to see how everything is being made simpler, faster, and more convenient.
In addition to that, countless companies have differentiated themselves in the market with great customer service.
Whether it’s the hand-written note with your online order from a boutique store or a customer service representative from a big tech company hand-holding people through process implementations.
Everything people experience on a daily basis influences their expectations, and what people are getting used to is great customer service. And if they can’t find it, they get frustrated and then they go somewhere else.
People carry those same expectations into their engagements with their financial advisors. If their financial advisor doesn’t give them a good customer experience, they will go to one who does.
2. Clients want to be in control of their data
We are living in an era of information, too much information some would argue. People have more access to information and data than ever before. This has brought up a lot of questions about who owns data. Companies like Facebook and Google have most commonly found themselves at the sticky end of that question.
People have realized more and more that they should be in control of their own data. They should be able to access it. It’s even ended up in regulations such as GDPR and POPIA.
Even the largest tech companies have had to conform to giving users control of their data. Beyond that, there is also open banking that’s been gaining traction. Everything is aimed at providing higher levels of financial transparency to the true owners of the data.
This is the expectation that people have now. When they can’t access their data freely, they get frustrated, lose trust and wonder why not, because the data belongs to them.
Advisors can’t be the gatekeepers of information anymore. People want access to their data, they want to know what is going on, and they want to understand what is happening, but most importantly, they want to be in control.
Many advisors think that they need to control the data to keep their clients, but they will realize that’s not the case. Clients will go where they can access their data. More importantly, more and more clients want easy, simple, and up-to-date ways of accessing their information. Not just a quarterly report.
3. Hybrid models are the way to go - Robo doesn't work
We’ve seen Robo-advice platforms come and we’ve seen them go. We’ve seen many of them end up being acquired by large banks to expand their customer acquisition funnels.
What we’ve also seen, curiously, is that people don’t invest large sums of money with Robo-advice platforms. Companies like Betterment and Wealthfront show an average investment portfolio size between $40 000 - $60 000.
People are comfortable investing in smaller amounts, but when they receive a large sum of money, they don’t want to make a mistake. They want an expert to help them make the right decision, and to guide them through the process.
Hybrid is the future. It’s where technology is paired with human expertise. Technology simplifies and scales, and humans deliver expert guidance through building relationships.
Financial advisors of the future will be engaging with their clients through online platforms to deliver this hybrid experience. Leveraging technology to scale their financial practice and deliver high-quality financial advice.
4. Technology is set to do the heavy lifting
Technology is making everything move faster. Technology is streamlining everything. You can literally launch a new business from your phone; build a website, design a logo, get it registered and launch your marketing campaigns.
Everything that can be automated will be automated and admin definitely can be automated. In Tim Feriss’ book 4-hour work week, he talks about automating your processes to scale your time availability. This is something countless entrepreneurs and businesses are focusing on. Reduce time spend on things that can be automated in order to focus energy where it’s more important.
Many of these solutions are already here. Technology can already be used to perform commission reports on an advisor's book. Advisors can also use scheduling tools to make the back-and-forth of scheduling a thing of the past.
Financial advisors that embrace technology and who are willing to change their workflows to leverage these solutions will find themselves ahead of the rest. They’ll have more free time, be able to focus more on building client relationships, and actually scaling their businesses.
5. Product discussion will become secondary
What people want; their goals, dreams, and ambitions matter to them more than the particular product that they need to buy. To them, the product is just the vehicle to get from point A to point B.
Product discussions are becoming secondary very quickly because people are also tired of being sold something. They want to know if the life they want to live is possible and if not yet, how they can make it possible.
They want to know how they can buy a new property, pay for their kids to study abroad, or even how they can take 6 months off to travel the world.
The conversation needs to be around what’s important to a person. That way, they also feel more invested in the solutions that they choose to implement. They can see the bigger picture of how it all fits together. They can get excited about the future.
Financial advisors will have to adapt to this more. Focus on what is important to a client and they will stick with you for a very, very long time. Don’t and they will be disinterested in most of what you have to say.
6. Clients will be able to choose how they pay
One of the biggest resistances to engaging with advisors is the fact that clients haven’t had a choice in how they pay, or how much they pay an advisor. Even in light of studies being done that illustrate that advised clients on average have a higher return on their portfolio over time than non-advised clients. Paying away 1 - 2% p.a while not being 100% sure what the advisor is actually doing, is a no-go for many.
People are looking for access to financial advice. Sometimes, they just want a quick sense check or to have a question answered. Other times they need a plan created and their portfolio tweaked. When an advisor engages with a client in these ways, the client experiences value, and when they experience value they are willing to pay for that value.
Many financial advisors are resistant to this because they are fearful of their bottom line. But the fact remains that if you deliver excellent and valuable customer service, no matter the payment structure, your clients will be more than happy to pay you for that.
By adding more value, without more effort thanks to technology, advisors are already able to grow their client base and retain more clients.
Many advisors have realized this and have already transitioned to fee-based models. Their clients are still paying them.
7. Advice will be possible across borders
The world has changed quite a bit over the last couple of years. One of the most significant changes is how people view online engagement for services. People used to be quite hesitant about the idea of conducting the majority of their business online, but now it’s quite common.
Financial advisors have already started to face complications around keeping and servicing their clients as their clients move to different countries.
We view this as a giant leap forward in the potential for the financial advice industry too to expand the way it operates. Think global collaboration.
Financial advice is pretty much the same, regardless of where you live, because financial principles are constant across the globe. Markets are different, but the principles remain.
Financial advisors will be able to collaborate with other financial advisors around the world, where an advisor in South Africa can advise their client living in the UK, but another advisor in the UK does the actual product implementation.
Conclusion
The future of the financial advice industry is very different from even its recent past. We believe that every advisor, who actively and intentionally moves forward with the changes that are already happening, will see great results for their businesses. While other advisors will have a hard time.
We’re working intentionally alongside many of the industry’s best financial advisors to make embracing the future simple and exciting. Our goal is to make sure that every financial advisor is best positioned, by using our platform, to grow their businesses, free up their time, and deliver exceptional client experiences to their clients, all without breaking a sweat.
The future of the financial advice industry is near. We hope you’re ready. We know we are.
If you're a financial advisor ready to embrace the future you can learn more about our platform here. https://wealthbit.co/
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