The financial services industry is facing a period of change like no other. Even the most successful firms are facing headwinds to their growth, with factors like uncertainty in the markets and an evolving geo-political landscape outside of their control. As a result, customers are expecting more from their advisor than ever before.
So how can firms build better strategies to stand out from the competition and create organic growth outside of traditional referrals? It starts by recognizing that creating a durable business is a long-distance race, not a 100-meter dash. We’re living in a time where there’s no shortage of great options available to improve your business, but making the right selections in areas such as new technology can feel overwhelming. To get started powering growth for long-term success, here are five key areas wealth management firms should consider.
Expand Your Customer Horizons
Client segments that were once thought of as “niche” are now core to wealth management firms’ growth strategy. Now is the time to strategically engage with growing client segments that increasingly control more U.S. wealth, such as:
Solo investors: One in seven Americans lives alone, according to a Fidelity analysis of U.S. Census data. More young people are forgoing marriage and children, and many older people are living solo due to a divorce or death. Soloists face unique challenges including lower retirement savings, higher expenses, and fewer employee benefits. With the number of soloists expected to rise, firms should consider anticipating how to tailor advice and life event planning to their distinctive needs.
Women investors: Despite the growing share of wealth controlled by women, the Fidelity Investments 2022 Investor Insights Study revealed that women report less satisfaction with their financial advisors and less knowledge of their services than men.1 They also report having 24% fewer conversations and engagements with their advisors over the course of a year than men. Fewer interactions and other communication disparities are likely a contributing factor to women’s reduced advisor satisfaction and knowledge levels. As more Baby Boomer wealth shifts to women, it’s imperative that firms understand how well they are serving their existing clients – and identify opportunities to grow the number of women they serve.
Next Gen investors: A great wealth transfer is underway. 57% of existing client assets will pass on to Millennial and Gen Z individuals by 20452, but Cerulli is predicting that more than 70% of heirs are likely to fire or change financial advisors after inheriting their parents’ wealth.3 These warnings also present an avenue for opportunity. This group is motivated to improve their financial situation, values professional advice – and is willing to pay for it. To get started, create an ideal profile of a young client, considering behaviors like savings habits. Next, make sure you are fulfilling the basics like reaching out to children of clients and provide services like financial education. Finally, evaluate your digital presence, as many young investors are seeking financial advice from online resources.
Engage At Scale
It’s no secret that our lives have rapidly shifted more to digital channels. As a result, more marketing must shift online to reach people in the context of their daily lives. So how can firms set themselves up for success to reach potential new business?
This can be attained by creating and committing to a digital marketing strategy that can endure the rapidly evolving environment we live in today. A good place to start is to remember the “Marketing Rule of Seven.” The idea behind this maxim is that a prospect needs, on average, seven interactions with a brand before they'll act. When drafting a marketing strategy, firms should think of channels or technologies that will scale them to help get them in front of clients again and again – as well as help personalize the approach for each prospect.
Evolve Your Offering
Regardless of how you reach them, another key element to bringing in new clients is offering the products they seek. If a firm cannot provide the fresh solutions that will satisfy their expectations for performance, they may risk losing clients to someone who can, as research continues to show that one of the top reasons a client switches advisors is to gain access to new products and services. From alternative investments to direct indexing– the tools are available, and investors want access.
Rising investor sophistication demands innovative solutions. The first step firms can take to stay ahead of the curve is to require education on evolving asset classes, even if their advisors aren’t bought in yet. The next step is to find ways to offer an intuitive experience to access the products through a single platform. If an advisor must go through multiple screens and programs, you have lost them. It’s essential to make sure everything works together seamlessly. Finally, a firm should evolve how their advisors approach portfolio conversations. In today’s environment, advisors will need to explain the portfolio and underlying investments in context of the client’s personal goals and preferences rather than using absolute or traditional benchmark relative returns.
Optimize Your Talent
While Cerulli predicts advisor headcount to remain flat through 20264, the larger issue is the 106,264 advisors expected to retire by 2031. As a result, there has been an industry-wide conversation about how to attract the best new talent. However, there should be an equal emphasis on how to retain current advisors and help them grow, as this can alleviate the pressures of managing employee turnover on top of the impending retirements.
Although compensation is usually the number one factor for advisor satisfaction, there are a few others that play a crucial role in a decision to switch firms. These factors include firm culture, better opportunities to grow and work/life balance. For firms looking to improve in these areas, it will require them to think about the value they bring to their current staff and creating ways they can easily identify with the firm’s mission and values. Implementing this can come in many different forms, but the most effective ways have shown to be offering career development opportunities, mentoring, recognition, and an environment that empowers them to lead work that they care about. A firm that fosters this kind of workplace and can grow more satisfaction and create more loyalty among its staff.
Be Data Rich
Data can be powerful, but only when it’s easily available. Therefore, the first step should be answering the question, “Where is our data?” If your data is scattered, it's difficult to harness. Consolidating data and integrating technologies could unlock vast potential for firms. And things really start to get exciting when we examine how data & AI can be used to help power growth.
There are already opportunities available today for firms to leverage AI to help increase productivity, put their data to work, and deliver a better user experience. For example, consider natural language processing which is being increasingly used as an aid for reviewing drafts of public communications or predictive modeling which is helping advisors prioritize their best leads and optimize their time. And with this new wave of generative AI, we’re just starting to scratch the surface of the potential that it holds to scale and elevate wealth management.
There is so much that can be done with data, but the best way to avoid being overwhelmed is focusing on use cases that will deliver value to your users and firm. However, it’s critical to maintain human oversight and stay close to the evolving regulatory environment when evaluating emerging technologies.
The Long-Distance Race
There’s no silver bullet to creating long-term growth, but there are opportunities to invest in today that can help to build a strong foundation for the future. It starts with thinking about the customer. Emerging client segments will require adjusting your normal advice protocols but can lay the groundwork of attracting them as they continue to grow.
This preparation will further allow you to think about what is required to reach them– like transitioning from analog to digital marketing efforts to meet these customers where they are. Or, recognizing that investors want access to innovative products and assembling your product mix to meet this growing demand.
It will also require a focus on attracting and retaining talent to weather the projected retirement wave. Attracting new customer segments or adjusting product mixes won’t do much good if there isn’t a supply of advisors to meet investor demand. Focusing on making employees feel valued, empowered, and inspired will not only help retain current employees, but will also help to attract talent from outside the firm.
Finally, thinking about how this can all be more easily achieved through data and emerging technologies. These tools will help enable firms to personalize communications, products, and services in a more targeted and effective way. Bringing these all together will not only help firms create a durable business but can power their growth for the long-haul.
Rohit Mahna is head of client growth at Fidelity Institutional Wealth Management Services, where he leads the sales and relationship management teams that are responsible for supporting RIAs, family offices, brokerage firms, and other wealth management institutions by understanding their business objectives and delivering the best of Fidelity to help them grow.