Financial advisors should adopt eight key strategies aimed at achieving long-term success for their practices, according to a white paper co-written by John Anderson and Raef Lee of SEI and Michael Kitces of Pinnacle Advisory Group,
The paper, entitled The Next Wave of Financial Planning, notes that technology and client engagement are the key drivers of change in the financial advisory industry and suggests that future investors will require a mix of robo-advisor strategies with more personalized human service.
According to the report, the following strategies will help advisors become innovative financial planners and give them the ability to meet investors' needs:
Plan with your clients.
Move away from “here’s your financial plan” to “let's develop your plan together.” Expand the conversation beyond finances and investing. Coordinate with other professionals such as lawyers, accountants, healthcare and real estate experts.
Adopt goals-based planning and reporting.
Lead conversations toward broader life goals rather than limiting discussion to financial goals. Direct conversations away from investment benchmarks and toward educing the risk of not achieving goals by showing “progress to goals.”
Hone your value proposition.
Identify your target audience and the services that they need—financial or otherwise. Use technology to compete virtually and nationally. For example, specialize in serving entrepreneurs of start-up companies. The range of services could include 401(k) investments, medical insurance, bookkeeping and bank lending.
Age-diversify your firm.
Hire some younger advisors, attract younger clients and serve multiple generations. By hiring across multiple age groups, your firm will naturally acquire a client base that mirrors the range of ages of your firm’s advisors.
Operationalize financial planning.
Develop a consistent way to track your clients’ progress relative to their goals and the plans you collaboratively develop. Implement alert-driven tools and other new technologies from account aggregation to goals based alerts that notify you when goals are approaching or a plan veers off track, and proactively reach out to clients with updates.
Assess your fees.
Consider how you might change fees if the industry shifts, and how you’ll differentiate your services so clients understand what they’re paying for. Simplify your fees and make them as transparent to the client as possible. You don’t want clients to be confused about how you are paid.
Become a techno-advisor.
Stay on top of technological trends and work to maximize tech offerings. Let clients decide how they want to interact with you—on Skype, in person or on the phone. Retrain your staff. Explore ways your software can be used to plan with your clients.