Wealth management firms and their advisors are looking at tremendous, near- and medium-term growth opportunities. In what’s being called the greatest wealth transfer in history, more than $2 trillion in financial assets is set to change hands in the U.S. between baby boomers and their children over the next five years.
To secure their share of this business, firms and advisors will have to overcome an array of challenges, including encroachment by robo-advisors, more scrutiny from regulators, and keeping up with investors’ changing priorities and preferences.
A new research report from Salesforce gives a detailed look at the evolving landscape in the financial advice business, and highlights changes advisors should make in order to maintain and grow their practices.
Illuminating the Path Forward
Entitled 2015 Wealth Management for Connected Investors, the report shows that advisors who embrace technology, use new communications channels and emphasize collaborative approaches stand a much better chance of winning new investors and retaining their existing clients.
The report is based on an online survey of more than 1,100 adults who currently have money invested with an advisor. It focuses on the top issues, preferences and expectations among three distinct groups of investors: Baby Boomers (ages 55 and over) Gen Xers (ages 35-54) and Millennials (ages 18-34).
It’s no surprise that Millennials show a strong preference for tech-savvy advisors. A strong majority of them (89%) said an important consideration in selecting an advisor is their use of modern tools for financial planning. Interestingly, this preference is nearly as strong among Gen Xers (83%) and baby boomers (71%).
Following are some of the report’s other key findings:
- Online reputation is key with younger investors – 77% of millennial respondent said that online reviews of financial advisors are important. Only 53% of baby boomers agreed.
- Low costs are attractive to all – Lean fee structures are an important factor for all investors (90% for baby boomers, 91% for Gen Xers and 93% for millennials).
- More collaboration is important – When asked how they’d prefer working with their advisors – with more autonomy, collaboration or delegation – a majority of all age groups said they wanted a more collaborative approach (51% of millennials, 56% of Gen Xers and 65% for baby boomers).
- Communication preferences vary – The study confirmed that the different generations have varying preferences for connecting with their advisors. Millennials like texting and instant messaging, while baby boomers prefer face-to-face meetings.
- Relationship killers exist —For millennials, high fees (57%) and use of outdated financial modeling tools (45%) were the two top reasons for switching advisors.
There’s no question that great opportunities lie ahead for financial advisors and wealth management firms. The only question is which advisors and firms will capitalize on more of these opportunities than their competitors.
Reports from experts, like this one from Salesforce, underscore what advisors and firms must do to compete in the changing advice market. Get aligned with the technology and communication preferences of clients and prospects, or get left behind. The right choice seems abundantly clear.