As Seen in Financial Planning
This is a critical time for the industry, with demographic and technological shifts creating tectonic pressures.
Here are a few trends all advisors should follow.
Money in motion:
Aging clients and aging advisors make a dicey combination. First, clients (who average around 60 years old in many organizations) will face their own mortality, look at their advisor’s firm and ask: Who will take care of my family when I am gone? Meanwhile, as advisors who have not planned for succession retire, many will execute sales and mergers in haste, leaving clients unsettled. Expect these two forces to create a “jump ball” over client assets.
The emergence of more automated planning options and hybrid offerings will force greater clarity around price and offerings. More educated consumers will demand to better understand the fees they pay and the services they will receive. It is not inconceivable to imagine a day when consumers can more effectively compare advisors’ prices and levels of service.
RIAs surge inside B-Ds:
Senior wirehouse executives realize they are in an “innovate or die” situation, with anemic growth and hobbled public trust. To the chagrin of many of their competitors, more wirehouses will establish RIA affiliates in an attempt to retain successful, entrepreneurial advisors who are capable of growth and would otherwise make the leap to independence. Such a move gives the big B-Ds better footing in the battle for assets of retiring advisors.
Many firms are reaching for the $1 billion AUM threshold. But to hit that milestone, and to ensure sustainable growth beyond it, requires more than the client management skills of a gifted founder; it requires disciplined management. I expect the prevalence of pure professional (i.e., non-client facing) roles to increase, creating a greater set of disciplined best practices.
Health care consulting:
Life expectancy is increasing, particularly for the affluent, but many people are living longer in poor health. This introduces a double whammy for clients, who not only must stretch retirement savings for longer, but contend with rising health care costs as well. Advisors must be able to help clients help navigate the health care system for themselves and their parents. The best advisors will find that supporting clients has both emotional and financial impact.
Underpinning several of these is the rising female consumer. Expect women to lead the push for comparative analysis; their longer lives will also make them key decision-makers as assets move among advisors. And with one in five executive women overseeing the care of an adult relative, expect them to start demanding health care resources and support; they’ll be looking for advisory practices that help families deal holistically with health, eldercare and wealth.