Future Financial Planning Megatrends (4 of 5)

Future Financial Planning Megatrend No. 4: The Future Wealth Advisor

financial planningNot every financial advisor will be a winner in the future financial planning industry. In the future, clients’ increasingly complex and demanding needs for financial advice will be best served by only the most sophisticated and forward-thinking financial advisors and firms. As such, financial advisors who want to get ahead and stay ahead must pay attention to predictive advice and future trends in the industry and implement forward-thinking changes accordingly. One of many trend forecasting reports that financial advisors may find helpful is the recently published Roubini ThoughtLab’s report entitled “Wealth and Asset Management 2021: Preparing for Transformative Change.”[1] This report delineates five megatrends that are predicted to reshape the financial planning industry and global wealth profession over the next five years.

 

If you haven’t done so yet, make sure to check out Summit Brokerage Blog’s previously published blogs on this Roubini Wealth 2021 report:

  • For Summit’s blog introducing the report and its five megatrends, click here;
  • For Summit’s blog discussing the report’s first megatrend, “The Big Shift”, in greater detail, click here;
  • For Summit’s blog discussing the report’s second megatrend, “The Rapidly Evolving Investor”, in greater detail, click here;
  • For Summit’s blog discussing the report’s third megatrend, “Rethinking Product and Market Approaches”, in greater detail, click here.

 

The instant blog will provide a more detailed discussion of the report’s fourth megatrend, “The Future Wealth Advisor.” The report’s fifth megatrend, “The Road Ahead: Driving Digital Transformation”, will be discussed in greater detail in a forthcoming Summit blog.

The Future Wealth Advisor

The following are key takeaways from the “The Future Wealth Advisor” portion of Roubini ThoughtLab’s “Wealth and Asset Management 2021: Preparing for Transformative Change” report:

 

Something old, something new:

  • The wealth profession features a mix of old and new. This is also reflected in investors’ attitudes towards financial advisors, which combine both innovative thinking and traditional values.[2] According to the Roubini report, when selecting an investment advisor, potential investors are still prioritizing the same long-standing criteria: quality of service; fees and pricing structure; and reputation, brand, and experience.[3] However, the report forecasts that in the next five years, investors will place more emphasis on assessing advisors based on this new criteria: their digital capabilities. These digital capabilities includes “anytime, anywhere, any device access, integrated omnichannel experience, and advanced use of digital technology and analytics.”[4]

The race against the machine:

  • The Roubini survey shows that although technology will change the future of the financial planning and wealth profession, technology and machines will not be replacing humans anytime soon. The survey shows that even though digital solutions are typically cheaper, investors still prefer using human wealth advisors for almost every type of investment activity covered in the survey.[5] As Dr. Dominik Helberger, Head of Strategic Clients and Managing Director at Berenberg Bank says, “While technology can offer much, in the end, money is a people business.”[6]
  • However, one way technology is changing the industry is through the transformation of client-advisor interactions from in-person and telephone communication to a wider mix of digital channels such as emailing, texting, social media platforms, telepresence and web collaboration platforms, and webinars.[7]

How advisors can add value:

  • In the future, personal wealth advisors will be able to add value and differentiate themselves from the machines through providing personal relationships. As an advisor, you’re not adding value simply by repeating computer-generated advice. To add value, you’ll have to provide something a computer can’t easily replicate: applying “judgment, intuition, and lateral thinking in times of volatility.”[8]

The 24/7, multipurpose advisor:

  • Pursuant to the the Roubini survey report, both investors and providers share the similar view that in the coming years, the role of the wealth advisor will have to change to provide more responsive, 24/7 service.[9] Since a single advisor can’t be available 24/7, the report suggests that the most effective way to provide the responsive, 24/7 service that investors desire is through a team approach with a mobilized staff of client-facing people.[10]

A generalist and a specialist:

  • The Roubini report predicts that in the future, advisors will have to provide a broader array of financial and life-planning advice.[11] As Bahren Shaari, CEO of Bank of Singapore, explains, “Clients are looking for something extra – guidance and direction on investments, family philanthropy, retirement, succession, and estate planning. The role of the advisor is becoming less transaction-focused and more about sophisticated financial planning.”[12]
  • Implying a further key shift, former Chief Investment Officer of Julius Baer Group, Burkhard Varnholt says, “Clearly the wealth advisor of the future needs to be much more of a generalist, whereas in the past, he or she was often just an investment advisor.”[13]
  • To fill this new role, a team-based approach will be helpful. Additionally, as Joseph Pagano, Practice Advisor of the Financial Services Digital Transformation Group at Cisco Systems, believes, “future wealth advisors will need to be “hyper- connected,” acting as the node in a web that includes the customer, relevant data, and experts in and outside the firm.”[14]

The new wealth advisor: joining left brain with right:

  • The next generation of successful wealth advisors will need to be able to combine left and right brain thinking to best serve their clients. Advisors will need to not only have a deep, expansive knowledge of financial markets and products but also elite relationship and interpersonal skills. This human side will include understanding clients’ fears and frustrations and effectively communicating technical financial and investment topics to layperson clients in a way they can interpret properly.[15]

The regulatory impact:

  • In major jurisdictions, there has been a regulatory push toward a fiduciary model of advice. As Bob Dannhauser, Head of Global Private Wealth Management for the CFA Institute explains, “The typical components of fiduciary duty are loyalty, prudence and care.” He continues, “We see more attention in the future being focused on the care that advisors apply to their clients’ investment and financial needs, perhaps with the benefit of easier access to information about client objectives and behaviors to inform that expertise.”[16]
  • As Christopher Jones, Executive Vice President of Investment Management and Chief Investment Officer at Financial Engines adds that in the future, the industry will be “much more regimented in the way they are able to provide clients with solutions.”[17]

 

Building trust:

  • In the wealth industry, trust is a critical but fragile necessity. There has always been a high barrier to establishing client-advisor trust, but in light of the financial crises and scandals of the past decade, this barrier has only gotten higher. [18]
  • According to the Roubini survey report, both investors and advisors largely agree on how this trust can be built: “provide good risk-adjusted returns, achieve financial goals, and understand the client’s goals and risk tolerance.”[19]
  • The Roubini report notes that “where providers and investors disagree is also revealing.” The report states that, “Many providers believe that they can build trust by increasing communication around integrity and emphasizing their reputations. But as Figure 4-5 shows [see p. 37 of the report], investors give higher marks to providers that demonstrate they will work in a client’s best interest. And regulators are making sure this happens.”[20]

To learn more about Summit Brokerage Services and our independent financial advisors, visit www.joinsummit.com or contact us at (800) 354-5528. Let us show you why we’ve been voted the number one boutique independent broker dealer firm in the country!

 

 

About Summit Brokerage Services, Inc.

Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.

 

About Cetera Financial Group

Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions.  Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.

Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations.  Advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology.  For more information, visit www.ceterafinancialgroup.com.

*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, The Legend Group and Summit Brokerage Services.

 

 

[1] To initially access the Roubini Wealth 2021 report, click here and then click on the green button that says, “Read the Report.” While the report is free to read, you must first enter your name and email address in the designated areas on the website in order to view the report.

[2] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 28)

[3] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 29)

[4] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 29)

[5] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 29)

[6] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 30)

[7] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See pp. 31-32)

[8] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See pp. 31)

[9] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See pp. 32-33)

[10] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 32)

[11] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 33)

[12] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 33)

[13] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 33)

[14] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 33)

[15] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 34)

[16] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 35)

[17] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 35)

[18] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 36)

[19] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See p. 36)

[20] Roubini ThoughLab “Wealth and Asset Management 2021: Preparing for Transformative Change” report (See pp. 36-37)

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