This article first appeared in WealthManagement.com’s 2023 Midyear Outlook.
By John Guthery, CFA and Peter Brittain
What are the key challenges facing the industry today? In this evolving “new normal,” financial advisors are seeking ways to efficiently manage their practice and grow their business amid the growing digital demographic.
To bridge the gap between clients and advisors, a solution that provides a consolidated, accessible digital workflow across various devices is increasingly in demand. In the following Q&A, we identify market trends and best practice ideas to help advisors plan for success in 2023 and beyond.
Q. Which responses and innovations have helped financial advisors manage their practice and grow their business in the evolving “new normal”?
A. Advisors are increasingly seeking a digital workflow that not only enhances operational efficiencies but also caters to the growing digital demographic.
All-in-one platforms are empowering advisors to service accounts across a broader spectrum. By offering digital advice alongside managed advice, advisors can service small accounts that will become larger accounts. Digital platforms that offer this flexible, hybrid approach to advice mean firms can efficiently service and incubate a new generation set to inherit the largest transfer of wealth in history.
Q. What strategies can help advisors meet the challenges brought on by inflation and higher interest rates?
A. Despite some cooling, inflation continues to pose real-life challenges for investors and advisors. This is to a lesser extent than the previous year which saw rising interest rates due to unexpectedly high inflation, creating a difficult environment for bonds and most investors. However, this year presents new opportunities, with the 10-year Treasury yield surpassing 4%.
This higher rate environment allows for the creation of portfolios that are less exposed to rising rates, offering meaningful income and better positioning to safeguard against equity market volatility.
This environment is ideal for evolving model portfolio marketplaces which offer advisors efficient mechanisms to manage and diversify client investments. Some commentators have said that the model portfolio business will grow to more than $10 trillion over the next five years. By allowing for effective implementation of third-party or advisor-driven model portfolios, advisors can deliver personalized portfolios at scale.
Q. What is tech’s role as firms seek to balance evolving high-tech solutions with high-touch advisory services?
A. Technology is not meant to replace traditional wealth management practices, but rather to enhance them. Wealth management firms are increasingly seeking a balance between evolving high-tech solutions and high-touch advisory services that can only be delivered through integrated digital platforms. In today’s era of instant gratification, going fully digital is the new norm, with onboarding taking as little as five minutes on some platforms. Streamlined digital workflows not only save time but create operational efficiencies and increase productivity, giving advisors more bandwidth.
Q. Which market trends, research, educational content, and best practice ideas can you provide that will help financial advisors better plan for and succeed in 2023?
A. Digital technology that can deliver personalization is key for advisors and firms that want to scale their growth. In a recent report, EY stated that over half (53%) of wealth management clients are willing to pay more for personalized service. All-in-one wealth management platforms can help advisors realize the promise of personalization.
First, platforms that offer true end-to-end workflows create a more efficient client experience that makes them feel like their advisor truly understands and values them.
Second, platforms with advanced data analytics empower advisors with scalable personalization tools from automated reporting and proposals to alerts and notifications.
John Guthery, CFA, is Chief Investment Officer and Peter Brittain is Head of Business Development with FusionIQ.