Evolving advisors don’t fear change. They embrace it.

The perfect storm continues to grow: spelling opportunity for those advisors who are committed to continuously evolving their approach

Nearly every aspect of the advisory industry is undergoing some form of transformation today — whether demographic shifts, capital market regime changes, rising regulatory pressures, or technological disruption. This can be a daunting prospect for many advisors: the activities that brought them to their current level of success are unlikely to help them reach the next tier of performance. However, for those advisors who embrace new approaches and re–engineer their businesses, the rewards can be tremendous — for them and their clients.

The inflection point: The key challenges facing advisors today

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The changing investor population

Demographic trends are having a huge impact on advisors’ businesses. On the one hand, many advisors’ most lucrative and long–standing clients are aging: by 2030, nearly five million people in Canada will be nearing or in retirement.1 These clients’ planning needs are changing — custom income plans and guarding nest eggs against investment mistakes they won’t have time to recover from — and they require more time from advisors at precisely the time that their value to the advisor (in terms of on–going revenue stream) is declining.

On the other end of the demographic spectrum, advisors who want to maximize the long–term health and value of their business need to shift their practices to serve the next generation of clients — Gen X and Millennials — who have different client service expectations and investment goals from previous generations.

Advisors who can deftly thread the needle of these complex demands on their time and resources will build successful businesses.

Shifting capital markets

The current extended bull market has been a blessing and a curse for many advisors. After all, what’s not to like about steadily upward moving markets? It’s great! Except, it weakens investors’ emotional resilience to market volatility. That resilience is like a muscle — and it hasn’t been exercized in several years.

While the investment crystal ball remains foggy about when the next recession will begin, how deep it will be, and how its impact will be felt in capital markets, future–minded advisors are preparing their clients to anticipate the potential emotional impact of renewed market volatility. For instance, they are introducing their clients to the concepts of investor behaviour, reviewing their financial goals, circumstances and preferences and ensuring their portfolios are positioned accordingly.

Rising regulatory scrutiny

Governments around the world have responded to the Global Financial Crisis and the growing retirement crisis by increasing regulation in the financial services industry. While this may have strained many advisory firms, the regulations also create an opportunity for advisors to distinguish themselves. Those who continuously improve their business — adopting a client–centric approach, streamlining product inventory and implementing a team–based approach — are likely to have a long, bright future.

Disruptive technology

Technological innovations have not left the advisory industry untouched. To some, robo–advice and fintech can appear threatening. After all, many of these technologies purport to do what advisors do: create investment portfolios aligned with a client’s goals and risk tolerance. However, here again advisors have an opportunity to differentiate themselves. Many advisors deliver much more to clients than simply an investment portfolio. They offer comprehensive wealth management — deep and on–going discovery of the client’s financial goals, circumstances and preferences, financial planning, behaviour coaching, for instance — that requires a level of emotional sophistication that machines are not able to replicate and that many investors don’t entrust to machines.

At the same time, advisors have an opportunity to intelligently incorporate technological innovations into their business. Improving efficiency and productivity of some back–and middle–office functions and delivering on many clients’ desire for greater accessibility and personalization of services online, can create great value for advisors. Technology can play a vital role for advisors: efficiency, effectiveness, and differentiation.

The bottom line

The advisory landscape today is not what it was even 10–plus years' ago — let alone what it will look like in 10–plus years’ time. This creates challenges, but also opportunities, especially for those advisors who are committed to evolving and continuously improving their practice. Focusing on those areas of the business that will drive growth in the future is critical.

With more than 15 years of experience coaching thousands of advisors as they evolve toward better businesses and better client outcomes, we believe that running an advisory business like a CEO, adopting a client–centric approach, aligning product inventory with clients’ desired outcomes, and taking a team–based approach will help advisors not only survive today’s disruptions — but thrive in the future, as the industry continues to evolve.


1 Statistics Canada, 2016 census

Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.

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