I recently had the opportunity to moderate a panel discussion at the FPA Major Firms Summit on the topic of what it’s like to be a financial advisor in 2016. Two independent, veteran advisors highlighted what is trending these days in their businesses, the changes they’ve seen over the years, and how their future outlook is shaping up.
Financial planning as a discipline and a process has been around for 50 years or so, and started when a few visionary life insurance brokers wanted to better serve their clients through a process versus just a product sale. However, it has certainly evolved over time.
According to these veteran advisors, both with over 30 years of experience, the impact that technology has had in their ability to deliver advice has been remarkable. In the early days of their careers, much of the process was paper-based, and sometimes took weeks or months to develop their financial and investment plans.
However, with today’s new tools, advisors are able to develop financial plans and investment strategies in a matter of hours, or just a few days, and automatically have them updated in real time through client portals and integrated technology.
While this increased speed has brought efficiencies to their practices, the panel participants are not so sure it has been as beneficial to clients. “Investors today get caught up in short term market movements they see in their portfolios and it has become a bigger part of our job to be financial therapists to keep them on track and not give into their behavioral biases to over-react,” was a consistent theme from both.
One of their big concerns for clients today is that despite having a financial plan in place, clients may not be able to afford the retirement they are envisioning. This is due to lower expected returns on financial assets over the coming decades, longer life spans, rising healthcare costs, and not saving enough during accumulation years.
“We often tell clients that we are here to take their money away from them today, so that we can give it back later, when they will actually need it,” - a tongue-in-cheek explanation advisors are using to help clients understand the many trade-offs involved in financial planning.
On a day-to-day operating level, both advisors were strong advocates for building out great teams in order to provide outstanding service to clients, running an efficient operation and being able to manage the growing needs of investors today. “Technology plays a big role, but ultimately, this is a service business and we need great people to make it work.” Along these lines, both veteran advisors were adamant that a robo advisor would never replace them. “A robot can’t give you a hug,” they said pointing out the emotional connection that is inherent in a financial planning relationship.
As each advisor was nearing 60 years old, both were actively working to nurture a successor to take their place, a process found to be quite challenging. “It is not easy to find all of the qualities you want in one person, so I am continuing to look. We definitely need more young people to join the profession.”
On the regulatory front, both advisors were very aware of the potential changes to their business stemming from the pending DOL fiduciary rule, but were not overly concerned. “We’ve had regulatory change before and the industry always finds a way to make it work. We will adapt to whatever changes are coming, just like we always have.”
Concluding the discussion was a view into the crystal ball for what an advisor will be doing in the year 2020 and even 2025. Consistent with their experiences over 30 years, both advisors were confident and optimistic. “Being a financial advisor is the best job in the world. With the many innovations in technology, products, and ways to deliver advice, we will be able to reach more and more people with a financial plan – an ability that is desperately needed these days as tens of thousands are retiring every day.”
To learn more about how advisors are managing their businesses these days, check out the many client stories here.
Timothy D. Welsh, CFP® is President and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and periodically blogs for Advent’s On Point blog. He can be reached at firstname.lastname@example.org or on Twitter@NexusStrategy.