Most financial advisors aren’t making needed changes to effectively serve clients in the next decade, despite the rapid reshaping of the financial industry, said SEI and the Financial Planning Association in new research unveiled yesterday.

“Emboldened investors are impacting every aspect of the industry. Many advisors and planners are at an inflection point. Our research shows they may be caught up in day-to-day tasks or facing a digital inertia, and not devoting their time and resources to future planning,” said John Anderson, managing director of practice management solutions at Independent Advisor Solutions by SEI. “Today’s pace of change is likely as slow as it will ever be, and advisors and planners cannot afford to take a wait-and-see approach to the future.”

The two organizations collaborated on the study, conducting eight in-depth, one-on-one interviews with planners and an online survey in August of 436 financial planners.  In May, SEI also surveyed 686 investors who work with planners to learn what digital tools they use with their advisors.

The study, “Advisory Firms in 2030: The Innovation Imperative,” looked at the financial advice profession today and assessed what advisors would need to do to remain relevant and successful over the next 10 years.

The study drew parallels between the massive consolidationand shifts in the retail industry as a result of e-commerce -- the continued closing of stores and malls as more shoppers go online -- and what is beginning to happen in financial planning as a result of shifting consumer demands. “Consumers are now calling the shots … Our research finds that more consumers than ever are comfortable with digital tools, while fintech enterprises are positioned to disrupt the front- and back-offices of advisory firms large and small,” the study said.

FPA President Evelyn M. Zohlen, CFP, said at a press conference yesterday that the study should serve as a wake-up call for advisors. Although many advisors recognize that technology can help increase efficiency, less than a quarter have plans to adapt their processes in how they work with clients, she noted. “There’s a gap with planners on what they think they need to be doing and what the reality of the demands of clients are,” she said.

Very concerning, Zohlen said, was that most advisors don’t consider millennials as “ideal” clients. The group came in second to last, just above celebrities and athletes. Small business owners came in first. Yet millennials do present a lot of opportunity for advisors: The generation is huge and households headed by them earn more than other generations did at the same age, she said.

Anderson said an important move that advisors can make is to segment clients to learn their needs.  Creating client advisory boards of clients with similar demographics can help an advisor learn how to best serve different groups, he added.

The study concluded advisors are too caught up with what they have to do today and spend little or no time planning for tomorrow. More than half of advisors (55%) said they have no business plan in place and more than half described themselves in ways that would be difficult for consumers to translate into value. For example, 28% described themselves as “offers life planning and financial planning” and 24% percent said they foster “personal connections.” In spite of more clients wanting to meet outside of an advisor’s office, most aren’t: Only 17 percent meet at a client’s residence and only 9% have virtual meeting with clients.

Planners were about evenly split on whether they think growth will be easier or harder in the future. Advisors were also asked to rank their top three business goals for the next five to 10 years. The top choice was to increase assets under management (66%), followed by adopting workflows to streamline business activity (45%), prepare for retirement or sell their business (35%) and adopt the best new financial technology on the market (26%).

The survey asked advisor respondents to rank what they thought would be the three biggest drivers of their firm’s future growth. More than three-quarters of advisors (77%) said client referrals, followed by centers of influence (50%) and educational events (31%). The FPA and SEI said they were surprised that advisors didn’t suggest they would grow their businesses by expanding services with existing clients.

Investors cited a wide range of technology tools they would use if offered by their planner, with augmented or virtual reality (17%), virtual assistants/chat bots (15%) and video conferencing (13%) coming in as the top three. Least cited was an online portal to manage accounts (4%).

Zohlen, who focuses on widows and divorced female clients, noted she recently started video conferencing with clients. Many clients, even ones who live relatively close to her office, have chosen to meet with her virtually because it saves them a drive in heavy traffic.

The widest variety of responses though came from advisors when asked what services they think clients will need. Nearly one quarter of respondents chose every category offered.  Nearly half of planners cited health insurance planning (48%), followed by digital asset management (37%), financial cybersecurity training (36%), discretionary trust administration and management (33%), a robo-like investment platform (31%), socially responsible/ESG investing (26%) and mental health capacity assessment for dementia (24%).

According to the study, financial planners need to:

• Plan for more than 12 months. They need to think about how to invigorate and truly differentiate their business and consider whether their value proposition will survive the next 10 years.

• Segment clients and anticipate future needs for each group. Identify at least one niche market in which you’ve been effective and think about how to attract more of those clients.

• Schedule two full days to frame a 10-year strategic plan. Look at how you can shift from a generalist to a specialist and provide more personalization. Think about how to attract younger clients.

• Listen more to your clients.  Develop an advisory board focused on clients and include at least one millennial member.

• Audit and assess your technology needs. If you want to become more efficient, consider what your technology gaps are and what you need to achieve scale. Try new technology and ask clients what kinds of tools they’d like to access.

Both Zohlen and Anderson noted each of their organizations have lots of resources available to help advisors determine how to adjust their practices for continued success.