Once more, advisors are facing a year that promises significant change, but this time it’s not regulatory change inspiring hope and dread.
With federal fiduciary regulation likely out of the picture until mid-2019, advisors are focusing on developing their practices at the start of 2018. Industry consultants are encouraging them to take a broad and open-minded view of policy, technology, investments and their clients.
“Firms that build a framework that’s flexible will be in a more stable position to compete going forward,” said David Hyman, the U.S. segment leader of wealth manager solutions at global consultant Mercer.
An SEI survey of more than 400 financial advisors from December 2017 found that advisors’ concerns were concentrated on three main areas: practice management, investments and technology. The most commonly cited goal for advisors over the next year will be increasing their referability. Advisors were also planning to concentrate on communicating more effectively with their clients, on marketing, on building integrated work flows and on investor education.
A year ago, the same survey found advisors most focused on complying with the Department of Labor’s fiduciary rule.
“Even though the DOL rule has been pushed back to the middle of 2019, in the conversations we’ve been having, firms understand that they now need to meet certain acceptable standards or face penalties or reputational damage,” said Hyman. “We believe that adhering to the proposed regulations can help differentiate a firm’s business and help them to be more robust than their competitors.”
Advisor concerns have shifted toward technological disruption. According to a survey of 728 board members and executives of financial services firms conducted by global consultant Protiviti and North Carolina State University in the fall of 2017, the top risk facing the financial sector in 2018 is technological disruption.
Last year, the same survey of executives found respondents ranking economic conditions and regulatory changes as the two most significant risks.
Tom Holly, an asset and wealth management leader at global consultant PwC, argues that the trend toward automation will continue as advisors seek more efficient ways of doing business and do-it-yourself investors seek more cost-effective ways of accessing markets and diversifying their portfolios. The growth of robo-advisors and digital platforms may eliminate the need for manpower within financial firms and mitigate a potential advisor shortage.
While some advisors still view robo-advisors and other automation as a threat to the profession, others think these technologies will augment human advice, not pose a competitive threat.