(SmartAsset) - The financial services industry is continuously evolving, leading to questions about what the future of financial advisors might look like. The good news is that the employment outlook for personal financial advisors appears bright, with an expected 15% growth rate through 2031.
However, rapid advancements in technology and shifting demand for advice among consumers may necessitate a new approach with regard to how advisors work. If you’re looking to grow your financial advisory business, check out SmartAsset’s SmartAdvisor platform.
Tech Trends Are Reshaping the Financial Space
Financial services are increasingly going digital, thanks to online tools and platforms that make it easy for people to track investments and get advice without leaving home. While plenty of investors still prefer in-person meetings with their advisors, for example, there are just as many opting to stay in touch via email, text, chat or video calls.
Robo-advisor platforms, meanwhile, have emerged as a competitor to human advisors. While robo-advisor technology is far from perfect, algorithms are constantly being tested and refined to offer a better experience and more personalized advice to clients. Some robo-advisors have even begun experimenting with artificial intelligence (AI) to enhance the level of services they provide.
The way advisors manage their businesses behind the scenes is also changing, largely fueled by technology. Cloud-based software programs and automation, for instance, are helping advisors to work more efficiently and streamline tasks so that they’re free to focus on what they do best: advising clients. So, what does all of this mean for the future of financial advisors? Simply failing to adapt to these changes could result in being left behind.
Staying up to date on the latest tech trends can make the easier to prevent. Advisors can also gain an edge by embracing technology that directly benefits their business through time saved, money saved or both. For instance, if you’re not testing the potential of digital marketing yet you might be missing out on opportunities to grow your client base.
Client Demographics Are Shifting
The youngest baby boomers are still a few years away from full retirement age, which is a good thing for advisors who serve that particular demographic or niche. The future of financial advisors, however, may lie with their children and grandchildren: Gen Xers and millennials.
Trillions of dollars in assets are set to flow from baby boomers to the next generation through the Great Wealth Transfer. Forward-thinking advisors are already taking steps to get ahead of the wave in order to best meet the needs of future clients.
In terms of what that looks like, it starts with relationship-building, first with older clients and then with their children. How you go about doing that can depend on your client’s expectations and what you’re doing to meet them.
For example, say you have a couple in their early 70s who are concerned about how their long-term care costs might impact their wealth down the line. That’s a great opportunity to open up a family conversation that includes their children about how long-term care needs will be met and how their assets should be handled in the event that they’re unable to make decisions for themselves.
Trust is the essential element in these conversations and that’s something good advisors seek to establish from day one. It’s also important to remember that the needs of future generations may not be the same as those of your current clients and the services or advice you offer may need to be adapted in order to reflect that.
‘Niching Down’ May Be Key
The financial services industry is highly competitive, challenging advisors to find that certain something that allows them to stand out from the crowd. Carving out a unique niche may be the way forward for advisors who want to attract more clients.
Why does “niching down” work? After all, you may be offering your services to a smaller pool of clients. The answer is simple: it doesn’t matter how small the client pool is if you’re one of only a handful of advisors who are serving it.
If you’re unsure how to choose a niche, examining your interests and expertise may be the best place to start. For example, if you’re specifically interested in wealth management then you may choose to niche down to focus on high-net-worth or ultra-high-net-worth individuals.
You can also consider the financial services industry as a whole and what areas you feel are lacking or might be the most underserved. In that case, niching down might mean tailoring your services to the needs of women or members of the LGBTQIA+ community. Yet another option is to target clients who work in certain professions, such as physicians or attorneys, who may have specialized financial needs and goals.
Financial Advice Is Changing But the Need Isn’t Going Away
If you’re wondering whether doom and gloom stories about financial advisors becoming obsolete, here’s some reassurance: people will always need financial advice. And while technology may satisfy some of those needs, it’s not a perfect solution or an adequate replacement for a human financial advisor.
What advisors need to keep in mind is what form that advice will take, how it will be delivered and what unique needs clients may have in the future. For example, one question that might be on your clients’ minds is what their Social Security benefits will look like in retirement once surplus trust funds are depleted. That’s still roughly a decade away but it’s something that bears consideration now.
Here’s another example. You might have younger clients who are interested in exploring alternative investments, like cryptocurrency. While there’s still heaps of uncertainty about the future of crypto, it doesn’t appear to be going away any time soon. If that’s not something you’re well-versed in yet, you may want to think about expanding services in that area.
Those examples may not apply to your business or client base at all, but they illustrate the importance of taking the long view.
Bottom Line
Without a crystal ball, predicting the future of financial advisors is not an exact science. It’s clear, however, that times are changing and the most successful advisors will need to be able to change along with them. Do these trends mean you should completely revamp the way you run your business now? Not entirely, as some measures that might be deemed old-fashioned can still work. But it’s always wise to be looking for ways to improve your business today that can benefit you tomorrow.
Tips for Growing Your Advisory Business
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Increase your digital footprint. More clients are going online to search for financial advice and connect with professional advisors. If you haven’t established a digital presence through a website or social media yet, those are two important things to consider adding to your to-do list. You can also use a service like SmartAsset’s SmartAdvisor to connect with prospects online.
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Connect with email. Email marketing can be an excellent way to build trust with existing clients and reach out to new ones. If you’re not building an email list yet, that’s something else you may want to add into your overall marketing plan.
By Rebecca Lake
