Kitces: 4 trends reshaping financial advice

Financial Planners

These trends are forcing advisors to refocus on the customer experience, says the popular blogger.

In a webinar on Tuesday, Michael Kitts, head of planning strategy at Buckingham Wealth Partners, spoke about industry trends he said were reshaping financial advice.

At its core, he argued, is technology, which is once again disrupting the financial advisor business model.

But he noted that technology disrupting the financial advisor business model is not a new phenomenon. Rather, it is something that has been happening repeatedly over the last few decades, much like the robo-advisor scare a few years ago, and advisors will have to adapt and move up the value chain or risk being left behind.

He predicted that these trends would accelerate as Generation X and millennials become a major market for financial planning services and a major demographic for financial planners themselves.

According to Kitces, here are four industry trends that are reshaping financial advice and prompting advisors to focus more and more on improving the client experience.

1. New technology

Technology played a key role in Charles Schwab’s success, Kitts said, noting that the entrepreneur from Northern California, near Silicon Valley, “started using these new things called computers to use technology to become the human beings of our time.” It confuses the financial advisors of

In the process, Schwab pioneered the discount brokerage industry in the 1970s.

In the late 1970s and early 1980s, “there was a huge boom in tech startups whose sole mission was to use computers to confuse the human financial advisors of the time, and the computers won,” Kitces said. I’m here. “The cost of running a stock trade was ultimately reduced by 90% he in 20 years. It was.”

“An interesting phenomenon is that technology has really disrupted the business model of financial advisors, but it hasn’t really disrupted financial advisors,” said Kitces. “We are still here. We have only evolved.”

New technologies are having a similar impact on the sector, but the best advisers continue to make the transition successful, he said.

2. Great Convergence

The growth of technology is “leading to a massive convergence of industry channels,” Kitces said, noting that traditional advisors are not really threatened by robo-advisors.

“We are buying technology to make our own systems and processes more efficient in order to design and implement a standardized portfolio … so that we can add even more value. he said.

This is similar to when brokerages started pushing for rule changes, allowing them to charge clients regular fees, not just trading, he noted.

Whereas there used to be very few hybrid advisor/broker/dealers, today, “nearly 90% of all advisors at top broker/dealers are dual-registered broker/RIAs,” Kitces said.

3. Crisis of differentiation

Kitces pointed to a survey that asked how advisors differentiate their offerings from their competitors. His 76% of advisors say their method of differentiation is their “ability to understand client needs and objectives.” “Anyone wondering who are the 24% of advisors who do not understand their clients’ needs and objectives?”

After all, it’s “actually a legal requirement. [to] Get to know your clients so they don’t get sued [so] This cannot be distinguished. Everyone has a legal obligation to do it. ”

Meanwhile, 72% of advisors said they differentiated based on above-average client service, Kitces said:

The challenge is that “many of the things we try to differentiate are not actually meaningfully differentiable.” [or] They are table stakes just for playing games.I mean, who’s actually going to say [that we’re unsatisfactory] In customer service, but do we make up for it in other areas?”

4. Exploring new business models

With about 80% of investable assets still in their hands, Kitces said many advisors are chasing the same prospects.

He added: [about] Whether there is anything wrong with the AUM model, and whether the AUM model dies.” The question is, “There is nothing wrong with the AUM model.” It’s just that advisors are running out of potential clients.

(Photo: Michael Kitz)

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *