High inflation, rising interest rates, falling markets, geopolitical uncertainty and fears of recession—2022 had it all. But despite the negative economic environment, 2023 actually is a great time to be a financial advisor.
The wealth management industry has been changing rapidly over the past decade. Those changes only accelerated during the pandemic. Change can be unsettling for some financial advisors, and they may self-select out of the business. But if you are willing to put in the work, now is an opportunity to grow your practice and prepare it for future success.
Your Services Are in Demand
With the market turmoil of the past year, there is a great need for trusted financial advice. Investors hadn’t seen a real bear market in more than a decade, so it’s not surprising that many were caught off-guard.
If financial advisors do their jobs right, their clients are prepared for the inevitable downturn and can keep them focused on their long-term goals, while adjusting where necessary and taking advantage of opportunities.
Many investors who were on their own now realize they need guidance and will start looking for a financial advisor. Others may be ready to switch from an advisor who didn’t stay in contact with them during the worst of the market volatility. Either way, money will be in motion over the next few years. With the right strategy, you can attract new business.
Technology Is a Game Changer
Advancements in technology that have swept through the larger economy are finally becoming standard in the wealth management industry. Clients expected that working with their financial advisors would be as tech-enabled as other activities, like banking or shopping. While the industry has been full of “late adopters” who were held back by legacy systems, platforms and processes, wealth managers of all sizes have caught up by going digital, transforming the way business is conducted.
Digital advancements have made running a practice more efficient, allowing financial advisors to be more effective than ever. Data aggregation tools, digital account opening systems and sophisticated wealth management platforms have all greatly improved both the advisor and client experiences. Spending less time chasing wet signatures and filing paperwork lets advisors use their most valuable resource—their time—on direct client and prospect relationship-building activities.
Practice Management Makes a Difference
Continued advancement of practice management tools can help you deepen relationships with clients and prospects, set yourself apart from your competition and grow your business. For example, by using these resources, you can figure out the social media “mousetrap” and learn about one-to-many digital marketing. While this may come natural to younger advisors who are digital “natives,” it can take some disciplined learning for older advisors who did not grow up online.
Staying engaged with clients and nurturing prospects through consistent contact is critical, and in a digital world, it is easier and more cost-effective than ever.
Wealth management firms should have practice management programs in place to help their advisors build their businesses. Mastering the nuances of digital marketing and social media is just one area where these resources can make a difference. Ten years ago, many of these programs didn’t exist. They do today.
The Wealth Transfer Opportunity
Although estimates vary, the “great wealth transfer” could result in younger Americans inheriting $84 trillion over the coming years. Talk about money in motion. A recent survey from FreeWill, a social-good enterprise, suggests that working with a financial advisor will be a priority for many once they receive their inheritance.
A survey of Millennials and Gen Xers whose parents or grandparents work with a financial advisor and who expect to receive an inheritance, found that nearly eight in 10 are likely to seek professional help in managing their money upon inheriting. Despite what many might assume, more than 70% of them prefer to work with a human advisor rather than an automated service.
And when asked who they will choose to do business with, 66% said they are likely to use the same advisor as their parents or grandparents. This is a great opportunity for growth and highlights the importance of building relationships with your clients’ families.
May the Demographics Ever Be In Your Favor
The overall aging of the U.S. population is impacting the wealth management industry, as more than one-third of financial advisors plan to retire within 10 years, according to Cerulli Associates. This is at a time of increased demand for the services these advisors provide. With only 10% of advisors under 35, the industry’s considerable efforts to attract new recruits will not make up the difference soon enough. This creates an opportunity for existing advisors who want to grow their businesses. It’s a simple case of supply and demand.
Despite the headwinds of 2022, advancements in technology and practice management have changed the industry for the better. You are in the enviable position of offering a valuable service for an investing public in desperate need of what you provide. It’s a great time to be in this business; however, due to the dynamic macroeconomic and financial situation we will see in the coming year, you must partner with a firm that shares your values and, critically, has the resources needed to support your growth goals.
Mark Contey is senior vice president, head of business development at LaSalle St.
