2016 outlook from top advice executives
InvestmentNews asked some key names in the financial advice industry what changes they expect to see this year.
“Firm leaders will need to make deliberate choices as they evolve from practices to businesses. With the technology boom and changing investor preferences, principals will need to decide: Do I want to focus on running a business, managing investment portfolios or building a digital experience for my clients? As firms continue to grow and evolve, we’ll see more of a professional chief executive role, who may not even be an adviser, and specialized leaders within the firm to allow for deeper focus on other critical areas of the business, like the digital client experience.”
“Firms that haven’t already done so will need to get on board and embrace the “youth movement,” implementing creative solutions to attract a younger and more diverse advisory force to better meet client needs. Baird will continue our focus on reaching the next generation of talent by partnering with universities and colleges, and dedicating resources to train and set up younger advisers for success. Equally important will be the need to attract younger and more diverse clients by adapting our service model to appeal to those at different life stages and enhancing our product offerings. ”
“The Department of Labor’s pending fiduciary ruling, rising technology and compliance costs, and increased regulatory scrutiny will continue to accelerate the pace of industry consolidation as advisers and firms question whether they are affiliated with the right broker-dealer. For advisers, finding a partner that has the size and financial stability, the resources to efficiently and effectively serve their clients, and a model that offers choice and flexibility will become more important than ever. Those firms truly dedicated to the independent model will be well prepared for industry shifts or further consolidation.”
“I expect our industry to continue to see more and more fee compression, as well as the offering of more and more services without additional compensation. Product access and commoditization should also increase with the added challenge of differentiation.”
“We need to reinvent financial and wealth planning so that we can survive and thrive in the future. The financial advice value chain is in the process of being up-ended. Historically, investing was the foundation of the adviser-client relationship. Now the situation is flipping because of technology and investor preferences. It’s critical for firms to build a solid foundation around the services that are much less likely to be commoditized — financial and wealth planning; intimately knowing your clients and guiding them through market conditions to their goals; and helping them manage the “moments of truth” in their life. The key, though, is to do it differently than it’s been done historically: successful financial planning will be interactive, a combined human-digital activity that keeps clients engaged with their goals and outcomes through ongoing feedback and iteration. Asset management and investment choices will be subordinate to the larger purpose of helping the client live the life they want and with peace of mind. ”
“I expect independent advisers to continue to successfully innovate, navigate and embrace change — whether in technology, regulation or human capital — and to put these changes to work in ways that make the RIA model stronger and ever-better positioned to serve the $23 trillion opportunity that awaits them.”
“The investing client is changing, and their expectations are defining their needs for the delivery of advice. Are we listening? The successes in the advice industry in 2016 will be driven by evolving WITH the needs of the investing clients, while adapting to change factors such as technology advancements, regulatory requirements and competitive pressures. Over the last decade or two we’ve seen unprecedented change, but now our industry has reached the point of maturity where the consolidation cycle is shortening. Commoditization is a driver of consolidation as offerings are easily copied, but over time commoditization results in even thinner margins while everything starts to look the same and stifles choices for the investing client. If we stay focused on the changing needs of the investing client, we will be inspired to embrace innovation. It is this innovation that will drive new business cycles as we find and create opportunity within the evolution.
”
“More adoption of new models for providing financial advice and a more competitive environment for financial advisers. Along with that, more interest by 401(k) plan sponsors and fiduciaries in obtaining sound financial advice, because of the emerging trend requiring putting advisees’ interest above everything else.”
“The biggest developments in 2016 will be further consolidation of independent RIA firms to create larger, professionally managed businesses, which we’re seeing as sophisticated wealth management businesses are serving client needs more broadly and service packages are expanding. We will see further attrition in the number of broker-dealers, either due to mergers, acquisitions or closures; and with that, a shift in pricing strategies between advisers, custodians and product providers to better reflect the true economics of the business. Rising interest rates will also likely give a boost to custodians and product providers, thereby allowing them to invest more of their retained earnings into solutions that will help their advisory firm clients to run their businesses and serve their clients.”
“Independent RIAs should keep doing what they’re doing — putting investors first — because they continue to grow at a faster clip than other channels. Advisers, though, must take steps to ensure they are positioned to thrive in a changing and more challenging environment, and that begins with articulating all the services and all the value they deliver to clients. The good news is RIAs are rising to the challenge by investing in technology that makes them more efficient, adopting digital advice tools to serve new segments of the marketplace, hiring and grooming the next generation and pursuing new business opportunities, such as the 401(k) business. And so when you consider that regulators are tilting the playing field in the favor of fiduciary advisers, the future truly is bright.”
“2016 should be a more volatile year for markets, so advisers will need to stay diversified and understand their clients’ risk tolerance. But advisers will need to shift portfolios to reflect the New Year.”
“Direct-to-consumer online investment models, an increasingly challenging financial services regulatory environment, rising interest rates, terrorist actions around the globe and the U.S. Presidential race will grab most of the media attention and news headlines. The firms and financial advisers focused on delivering thoughtful, comprehensive, goal-oriented, and personalized advice to clients, leveraging technology for improved client experiences, will continue to attract assets and succeed. ”
“While the DOL’s fiduciary rule is top of mind for all, a very wise man once told me to “be the protagonist.” For 2016, I hope to take that advice particularly to heart and seek to turn challenges into opportunities.”
Learn more about reprints and licensing for this article.
