Advisors anticipate their assets under management will increase by 7.2% over the next 12 months with even better results the two years after, according to Natixis, a global financial firm with its United States’ headquarters in Boston.
Financial professionals who were surveyed by Natixis said they anticipate an average annualized AUM growth rate for the next three years to reach 17.2%, with much higher rates in the second and third years, Natixis said.
The optimistic outlook was shown in the Natixis Financial Professionals Survey, which included 300 wealth managers, registered investment advisors, financial planners, and wirehouse and independent broker-dealers in the United States. The survey was fielded in March and April after the start of the pandemic and was released today.
“As investors try to make sense of markets dominated by an unprecedented global pandemic, financial professionals expect to see healthy growth in assets under management from clients seeking more planning and investing advice,” said the survey.
Most (89%) of those surveyed said the AUM growth for the next 12 months will be driven by new assets from new clients. Only 55% said they are counting on increased market returns as a primary growth driver.
Although the advisors are optimistic about their futures, they also said they see new challenges ahead for themselves and their firms, including emerging competition for assets, shifting client expectations and ongoing market uncertainty. It can be difficult to find time for business development, the advisors said. Advisors spend 9% of their time prospecting for new clients.
Advisors said they know where they need to improve their business models. They said they need to establish relationships with family members and next-generation heirs of their current clients; help existing clients to avoid making emotional investment decisions; and demonstrate the value of their advice beyond building and allocating investment portfolios.
They also seemed to have a clear idea of why clients leave one advisor for another. Sixty-nine percent said failing to communicate with clients in a way they expect is at the top of the list, followed closely by 64% who said it came down to not listening to clients. Only 27% said clients leave due to a failure to meet their return expectations, the survey showed.
“Advisors are adapting their business to align with anticipated growth opportunities, and the path to profitable growth isn’t likely to follow the status quo,” Dave Goodsell, executive director of Natixis’ Center for Investor Insight, said in a statement. “To win assets, advisors need a keen understanding of how clients’ needs and expectations are evolving. At the same time, one of the most important roles for advisors is setting realistic expectations for their clients, and more actively planning to reach the goals of both the client and their next generation heirs.”
“While financial professionals have traditionally succeeded by positioning themselves as experts at selecting investments and managing client portfolios, the survey’s findings suggested these professionals are reframing their value propositions as clients seek a wider array of investment and non-investment-related services,” Natixis said.