What will financial advisor of the future look like?
According to Brett King, a self-styled “futurist,” author of the book Bank 2.0 and the keynote speaker at FSI’s Onevoice 2013 conference here, the future belongs to financial advisors who are digital natives, comfortable ceding ground in terms of expertise in clients eyes, and flexible enough in work habits and practice to adopt to rapid change.
He fully concedes the audience is underwhelmed by the revelation. “We look at this message with a skeptical eye. We’ve heard this before, and nothing has fundamentally changed.”
After all, some financial instruments have deep historical roots. The word “check” is derived from a Persian word used by traders on the Silk Road. Bonds were sold to citizens of Verona in the twelfth century, who started to trade them – early speculators.
“The financial services industry takes some time to change,” he says. “At the core was protecting the assets of the clients. That goes back to the time of the Knights Templar. They were responsible for moving the assets of royalty safely. They were the first financial advisors, except they carried swords.”
That began to change when asset allocation and growth, over asset protection, became the mission.
“We have predicated our business on knowing the financial services business. Our business is predicated on information scarcity and information asymmetry. We can give advice because we know the industry trends, market analysis, etc...We know something the client does not know.”
The challenge today is the intelligence that advisors used to have exclusively is now being shared among clients. Consider Covestor, which allows investors to see the holdings of the best portfolios and mirror them in close to real time. DCM Capital launched a hedge fund based on stocks mentioned on twitter timelines, gauging the sentiment of twitter users on the equity as a leading indicator of performance.
“The concept of advice being exclusive to our industry is being challenged,” King says. Many clients think nothing of checking advice with friends on Facebook or followers on Twitter, trusting the response there more than the response they get from their advisor, in many cases.
That does not render the advisory model moot, but it does mean advisors will have to change the way they dispense advice, how the dispense it and in what contexts. All of that is changing for clients.
Consider that teenagers talk on the phone 25% less than their parents did when they were the same age. And parents didn’t have mobile phones. But teenagers don’t use phones to talking, King says, but for texting. And who uses email anymore? Not teenagers.
“By 2020, 42% of mass affluent clients wil be gen Y,” King says. “Their instinct will not be to pick up phone to get advice or put in a trade. Their instinct will be to ask their friends. They trust their friends more than ads and newspapers.”
So what’s the solution? Advisors need to be as digitally focused as their clients. Sales pitches, no matter how friendly or discreet, will easily be detected and not trusted. Don’t use brochures. Don’t hand clients static paper. Engage them with content – lots of it. Use it not to make recommendations, but only for information and conversation starters in whatever medium they choose.
In other words, stop being the expert, and start being the friend.
