Two Major Trends for Financial Advisors

Financial advisors have endured massive changes over recent decades. Clients continue to be served in dependable ways, but the entire working day of a financial advisor has evolved. From compliance requirements to technology tools, advisors have already overhauled their practices. For this reason alone, advisors would be excused for wanting a period of stability and certainty.

Strategic Shifts That Warrant the Attention of Advisors

Yet, change continues. BlackRock has recently collaborated with Morningstar Wealth on this matter, via the Simple, but Not Easy podcast, citing two glaring shifts that advisors ought to acknowledge:

• An increasing concentration of wealth among high-net-worth clients.
• A huge intergenerational wealth transfer, with approximately $70 trillion in assets set to be inherited by new clients.

Liz Koehler, managing director and head of advisor engagement at BlackRock, said on the podcast, “It is an opportunity, but it does require a deeper understanding of who these clients are, what they want, how to differentiate, and reimagine the offering—and there are a number of ways to do that.”

Jonathan Linstra, managing director of Morningstar Wealth, Americas, shares a similar tone, referencing it as “a great opportunity.”

Covered in the podcast is the use of models to drive scale, direct indexing, behavioral application, and the notion of cost transparency. Clients are certainly expecting more transparency, especially when it comes to pricing, pushing advisors to evolve and improve their value proposition.

On the Advisor Value Proposition

Koehler shares clear views on this matter. “Everyone has a value proposition, or you wouldn’t be in business. But what we’re seeing more advisors evolve to is, why they’re in the business, why they serve the clients—and linking it to real stories to bring it to life,” she said.

Koehler asks advisors to consider: Who is your ideal client and why? How do you differentiate your firm? What roles do each member of the team play?

“That really matters more than ever today, getting clear on that,” she said.

How Will Clients Be Cared for Going Forward?

Koehler’s judgments were reasoned by looking at a changing client profile.

“The average advisory client is 62 years old, a baby boomer on the brink of retirement,” she said. “And then you have this whole new generation of clients and those set to inherit $70-plus trillion in assets. And they’re just different in terms of who they are and what they want.”

The data would seem to support that this applies even among existing clients. Only a few years ago, 70% of clients wanted to be within driving distance of their financial advisor, now that number is 30%.

“Client expectations are certainly changing and rightfully so, and this is driving, we see, a change in the role of the financial advisor,” she said.

Using Model Portfolios to Drive Efficiency

Scale, personalization, and customization are all words used in the podcast. But some do it better than others.

“Those advisors who are investing in scale—whether it’s through technology, whether it’s through models—are the ones that are able to go deeper with their clients, broaden their reach, and continue to innovate,” Koehler said.

To that note, the podcast touched on the recent news that Morningstar Wealth has opened up its advisor wealth platform with a curated list of investment strategies, including BlackRock models, providing greater choice and flexibility to advisors.

Growing Organically, Maintaining Practice Stability

“The demands on advisors are increasing daily, and they’re navigating so much … particularly in times of volatile markets,” Linstra noted. “The phone doesn’t stop ringing.”

This part of the client experience is unlikely to change. Koehler, who holds a Master of Positive Psychology, said, “There’s so much science and research out there that shows how our thoughts and our emotions hold so much power, and there are really interesting and intentional strategies that help us to bolster that and bolster ourselves, and that really contributes to our financial well-being.”

Growing in importance is the service model that’s built around the investment offerings, which has become increasingly critical in truly empowering investor success—and advisor success, for that matter.

“A lot of the advisor teams we work with are taking the time to step back and reinvest and take a fresh look at their own practices,” Koehler said. “Yes, to help them grow organically but also to outsource certain elements of their business to scale.”

Regarding the future of advice, perhaps Koehler said it best: “Continue to be open-minded to look at where the industry is headed, where your clients are headed, and the unique and different ways that we can truly serve them. And don’t be afraid to work with partners who are invested in this journey with you.”

You can listen to the full podcast episode for more.

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