Looking at the financial advisory business of tomorrow

I’ve recently spent some time overseas where I’ve had a chance to talk with financial advisors in places such as Australia and New Zealand. What I heard there confirmed what I’ve been seeing in the United States and elsewhere: It’s a changing world for the financial advisory business. I talked about this in my recent interview.

Boomers are retiring

Perhaps the biggest change is one we’ve seen coming for a long time. The baby boomer generation is finally retiring. That’s a big shift for financial advisors. Instead of helping boomers accumulate wealth and prepare for retirement, advisors are now starting to help them manage their savings and assets within retirement.

This shift requires advisors start to change the approach they take with this large group of clients. The days of measuring the performance of a client’s portfolio versus market indexes are coming to an end. Now advisors will need to be more focused on an outcome-oriented approach – an approach that takes into account the real daily needs of clients, like boomers who need to make sure their assets and savings last through retirement.

This type of client-centered approach may sound scary to some advisors. But it shouldn’t. It’s actually liberating. That’s because while advisors will need to retain a degree of savvy about markets, they’re now being asked to focus more on client needs and desired investment outcomes. Most advisors will find this to be a refreshing change getting to truly align investments to the true goals of each client, rather than a formula or benchmark comparison.

Time to build teams

A second change I’m seeing follows naturally on the first: Advisors themselves are graying. They need to be thinking about their own transition to retirement and how to build the most value in their business for when they sell it or otherwise move on. As I mentioned in my last post, building strong teams and finding new talent has become an important task for established advisors.

In particular, advisors might consider looking for team members who can help them connect with millennials. That demographic was badly frightened by the Great Recession, and has shown itself to be wary of traditional investment vehicles. But connecting with this audience and helping them see the value of good advice and sound strategy is essential to the future health of advisory firms.

Building value with relationships

Now, more than ever before, investors today have more access to information on markets and investing. In some ways this is a bad thing – the investment advisor today has a lot of competition when it comes to delivering insight.

At the same time, it’s equally true that good advice remains scarce. Maybe even scarcer than ever. This is where advisors can break from the pack. By offering a forensic understanding of clients’ needs, and combining that with well-considered market insight, advisors may be able break through the noise and deliver real value.

It’s a changing world for advisors. We all know that change can be daunting. But it also creates some great opportunities.

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