It’s no surprise that the future of wealth management and financial advising is starting to evolve -- and we are going to begin to see these changes in the next few years. Although 2020 was a challenging year, to say the least, we saw accelerated changes in the type of customer seeking out financial advice and the need for advisors to adapt quickly and pivot to a more holistic relationship with clients. We’ve identified three areas that will be subject to this shift in 2021 and beyond - customer types, advice need and areas of focus, and the rise of technology.
A New Generation of Client
The “face” of the client is changing and will continue to over the next decade. Recent trends show that women, millennials, and gen-x’ers are starting to gain control of more assets. Additionally, the transition of assets from the baby boomer generation to their children is expected to grow drastically. The next couple of decades will create a very unique environment with assets up for grabs in the next 20 years. Millennial clients, specifically, will have different expectations of financial advisors and how they want their services delivered to them. They will seek out advisors who speak their “language” who know how to gain their trust, and are digitally savvy.
This is where the fee-for-service model comes in -- it was born out of a desire to service Gen X and Y customers by taking their financial planning needs into consideration. While in the past, financial planning was typically offered as an add-on service to asset management, the fee-for-service model now gives younger clients the opportunity to access this as a separate service. Its applicability is due to its flexibility, which allows financial planners to grow their client base by scaling their businesses in the direction of a younger market. By diversifying into the Gen X and Y market, financial planners can forge relationships with clients from early on, prizing long-term client retention as an important facet of the fee-for-service business model. If you can advise your clients about the effective use of their money when they are in their twenties, you may be managing some large assets of theirs when they are in their fifties and sixties.
Want more information on pricing fee-for-service financial planning? Check out this article.
Types of Advice Are Changing
We will also see a shift in the type of advice consumers are looking for. Patterns show that people want a more holistic approach to financial advice -- meaning that needs are shifting away from risk-based portfolio construction to outcome-based planning, which spans across multiple facets such as investment, banking, health, and real estate. This has become amplified by the 2020 pandemic, as this type of planning now includes building emergency funds and managing debt. This kind of hyper-personalization will continue to grow in the wealth management space. A more customer-centric operating model can help firms better understand their clients and help them along their entire wealth management journey.
Overall, the future of financial planning favors advisors who help their clients build wealth, not just manage it. That’s what fee-for-service is all about. Check out these five reasons to adopt fee-for-service.
Rise of Technology
There is no doubt that technology will have a monumental impact on the wealth management industry in 2021 and beyond. Embracing the new age of tech will become essential in a few categories -- having a strong online presence, artificial intelligence and analytics, and providing digital applications for the next generation of consumers.
2020 saw a massive shift in bringing business and interactions online. Firms with a robust online presence had an advantage in a year of social distancing and were able to hold on to long-lasting growth. Furthermore, advances in AI have enabled firms to create tailored risk profiles and advice at a lower cost. Customer-centric data can help wealth management firms move away from having a fixed product mindset to a more customized client journey. Lastly, as we see a new generation of clients arise over the next few years, expectations for bringing engagements virtually, such as seamless app experiences and online payments, will become the norm. Having digital capabilities are going to become essential for ongoing vitality.
As consumers and advising trends start to evolve, the AdvicePay platform can help you scale and grow your business. Through a streamlined and simple to use interface, you have the ability to get your client agreement signed and get paid all in one, easy workflow and your clients will be able to instantly pay for planning services through their mobile device. AdvicePay is the tool you need to grow your pool of clients and cater to the next generation of customers.
Have questions about introducing new technology to your practice? Check out these three tips to seamlessly adopt new technology.
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Posted by Lana Dalton
Lana is a Happiness Champion (aka Relationship Manager) at AdvicePay and loves helping enterprise users implement and optimize the AdvicePay platform. After graduating from the University of Washington in Seattle, Lana spent the past three years working in the tech industry, helping organizations implement software, create training content, and establish onboarding processes. When she’s not helping our enterprise users, you can find Lana trail running, backcountry skiing, and cooking different types of cuisine.