Digital Disruption: Is the Financial Advisor’s Value Under Siege?

While financial services have traditionally focused on the economic well-being of the client, engaging with the client in a more fully holistic approach may ultimately drive greater client loyalty. The brand of full-service investment advice that the industry has historically delivered is under review as new models and competitors emerge. At the same time, escalating regulatory oversight and compelling technology platforms are converging. The headwinds the industry faces suggest a time of significant change is here.
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No one factor is the root cause; rather, there are multiple influences at work. Some are environmental. Others fall within the realm of human nature. Together, these factors are changing investor behavior.

In light of this crucial shift, advisors need to re-examine how they deliver value, based on an analysis of the factors influencing investor behavior and needs.

Environmental Influences

The landscape for delivering financial advice has been reshaped by the new Department of Labor rule that requires anyone providing advice on retirement accounts to be considered a fiduciary by April 10, 2017. The shift means financial advisors are legally bound to act in the sole interest of the client and to act with skill, care and knowledge. In this new environment, advisors will need to re-examine their relationship with each of their clients.

A set of best practices should help advisors innovate to a new business approach under increasing regulation. These practices include:

• Adopting a planning approach

• Transitioning from selling to consulting and advising

• Structuring regularly scheduled and meaningful client contact

• Documenting client conversations

Technology offers a separate environmental challenge. The widespread adoption of digital communication has affected every age cohort and income group, especially higher income groups. Ample evidence suggests clients expect to interact with their advisors in new, technologically based ways. Already, investors have a wealth of digital tools to manage their own affairs and “disintermediate” assets once managed by financial advisors. Consequently, financial services is ripe for technological disruption.

Lifestyle Influences

Several lifestyle trends are shaping our plans for the future and altering the need for advice, while giving rise to new attitudes about work and retirement. While wealthier investors may be optimistic about maintaining their current lifestyles after they leave work, others are worried they will outlive their savings.

An important component in this trend is that people are determined to live with purpose in their later years, whether they retire or not. How will advisors help clients live meaningful lives for decades after retirement age?

Disrupting Digital with a New Model of Advice: Moving in for a Closer Look

Clients in the 1990s found it hard to invest on their own. Access to information was restricted, and the investor needed someone to help translate the language of investing and provide research, execution and reporting.

Investors can now research and buy investments on their own. Diversification was once offered only through an advisor, but today clients can assemble a sufficient mix through a variety of funds. Yet, while investors’ needs from advisors may be less clear, what they gain may be more meaningful. Advisors offer new value by transcending conventional financial advice and cultivating overall well-being, as defined by clients’ network, wellness and financial resource profiles.

A New Kind of Practice

To forge a new kind of practice, advisors must expand their understanding of clients’ needs and goals. The new advisor value proposition is about enhancing the well-being of clients and freeing up time for fulfillment and true happiness. It will be critical for advisors to change the conversation, combining coaching and consulting to uncover the values most important to their clients.

When the vision for the practice is no less than enhancing well-being in every area of clients’ lives, advisors add value at each step of the value chain. Ultimately, advisors can have more meaningful and holistic relationships that exceed clients’ expectations — relationships that redefine advisors’ essential value in the lives of 21st century clients. To learn more, download and read the First Clearing white paper, “Digital Disruption: Is the Financial Advisor’s Value Under Siege?”.

First Clearing is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. &Copy; 2016 Wells Fargo Clearing Services, LLC. All rights reserved. First Clearing provides correspondent services to broker-dealers and does not provide services to the general public. 1116-01813