“In essence, these executives are acknowledging whether their firms are acting as asset managers or as advisors to their clients, and they’re finding that they’d rather move up the pyramid,” says Chisholm. “That helps explain why the industry is trying to marginalize some of these fundamental parts of the pyramid towards technology, which in the end creates extra capacity for production within their firm, which helps them move up the value stack."
To move up Fidelity’s value stack, advisors will have to harness several value drivers. First, they must drive better outcomes for their clients and make those outcomes the center of their conversations. Fidelity argues that this can be achieved by adopting a fiduciary mindset.
Advisors could also shift their thinking on portfolio construction from being sellers of products or investment solutions to buying agents that find investors fee-based investing vehicles, risk management opportunities and opportunities to reduce costs, says Chisholm.
Another key to driving more value for clients is segmentation to deliver clients the value that they need, says Chisholm. Clients should be thought of on a spectrum of investible assets, where mass market clients might receive automated services, mass affluent clients might receive some episodic advice triggered by financial needs or life events, while higher-net-worth clients receive more involved services like a personal CFO or financial life coach, and the ultra-high-net-worth are served with the bespoke solutions of a family office.
“We think that firms need to understand segmentation in a more robust and diverse way, whether it be segmentation in production, or according to the basic needs of the investors,” says Chisholm. “Smaller clients can be backed into what advisors can provide along with a self-directed or technological approach to investing, while larger clients get higher value adds. This is all in line with, and in part being driven by, the fiduciary mindset.”
Advisors must also become more fluent with technology, said Fidelity, and the firm leaders at their conference agreed, with 32 percent of them saying they would use digital enhancements within their business to create more value for their clients. Chisholm said that the most powerful technological drivers are automation, which expands productivity, and data, which can deepen client relationships.
Finally, advisors should endeavor to build sustainable, diverse and enduring multigenerational firms in order to give their clients more peace of mind, according to Fidelity.
“Not every firm will want this kind of longevity. Some advisors will want to be lifestyle practices that will decline as their clients need to draw down their accounts,” says Chisholm. “We believe there’s no right or wrong ways here, but if you want to create more value for your clients, extend the longevity of your business.”