The financial advisory business is dramatically changing. While the transformation is apparent, in many quarters the changes are relatively slow-moving, making them easy to ignore. But why would so many, from broker-dealer senior executives to custodians to financial advisors, want to ignore what’s going on? Simple. It is the effective end of their careers.
But for those professionals who understand and embrace the changes, there are tremendous opportunities to excel. The changes will offer them the potential to deliver incredible value to clients, and that will translate into substantial success and personal wealth for them.
However, it is very clear that those more visionary professionals are in the minority. And the changes will push a large percentage of advisors out of the business. Among those who remain, many will have lesser roles (with lower incomes).
Drivers Of Change
Quite a few things are hastening the changes in the industry. Private wealth patterns are shifting throughout the globe, putting greater pressure on financial advisors to perform at higher levels. The shifts are also pushing down their fees. For example, more erudite clients are increasingly questioning the value they receive for their cost of services. The ultra-wealthy (those with a net worth of $30 million or more) are inclined to negotiate their expenses.
Currently, the two biggest harbingers of change are commoditization and technology—particularly when they overlap.
Take a moment to consider what services or products any high-quality financial advisor can provide to a client that other high-quality financial advisors cannot. Think of how many top-notch financial advisors have access to the same array of services, such as estate planning and charitable-giving strategies or investments running the range from traditional products to alternatives. Comparable products are always available that can produce equivalent results.
In reality, any differentiation you offer in your services and products is strictly a function of marketing; it’s not inherently about your unique capabilities.
Without question, in the near future financial advisors’ offerings will be entirely commoditized.
The other major change in the industry has been forged by technology. Intermediaries are being pushed to the side as clients turn to things like robo-advisors. The robo model will only become more sophisticated, taking on financial and estate planning capabilities. Not only will it take clients away from financial advisors, it will slowly, almost imperceptibly, lower their fees, and by extension lower their earnings and income.