While the pandemic market presents many challenges, it also provides an opportunity for financial professionals to step back and consider the business landscape and rethink business strategy. For example, traditional advice models were under pressure by technology before the pandemic, but it’s likely the pressure will increase in recovery.
Digital competition expected to accelerate
When asked who their competition is today, six in ten (62%) say it is traditional financial professionals. Few see DIY tools for investors (16%) as their primary competition or see automated advice platforms (10%) and industry disruptors (9%) as a threat.
But the pandemic has shined a spotlight on technology: Zooms and WebExes have taken over the days of millions working from home. Amazon trucks are a ubiquitous presence in neighborhoods around the world. And a smart TV streaming Netflix has become the hearth for tens of millions of households.
Financial professionals see the writing on the wall and see tech soon catching up to their industry. When asked to project their competition in five years, only one in five think they will face off with other professionals. Instead, disruptors (31%) are their concern, with enhanced DIY investor tools (25%) and automated advice (21%) running close behind.
Only 17% think financial professionals lose clients to disruptors today. But in thinking of the future, it appears they are most concerned with the question: “What happens if Amazon, or Apple, or Google decides to get into the financial advice business?”
Biggest competition now and in 5 years
Results comparison from 2018 and 2020 surveys
?Biggest competition now
?Biggest competition in 5 years
Traditional financial professionals
Improved tools for self-directed investors
Automated advice platforms
disruptors in the financial industry
The tech opportunity for financial professionals
Financial professionals are not going to sit back and let technology take business away. Many see that it can also be a powerful business resource. When asked about best practices for efficient growth, financial professionals place technology, or strategies best implemented with technology, at four of the top five strategies.
This includes leveraging technology like customer relationship management systems (48%), streamlining their client base (44%), client segmentation (43%), and leveraging tools, like portfolio analytics, offered by asset managers (28%). In fact, niche marketing such as to medical professionals (31%) is the only traditional strategy that ranks in the top five.
Ultimately, enhancing efficiency will serve professionals well as they look to face up to the many challenges facing their business.
Services are critical opportunities to differentiate
Traditionally, many professionals have succeeded by positioning themselves as experts in selecting investments for client portfolios. But clients demand a wider array of services, and professionals are reframing their proposition.
When asked what clients have asked for more of in the past 12 months, financial professionals put retirement income planning at the top of the list. With more of the responsibility for retirement funding shifting from employers and government programs, it’s no wonder that six out of ten (59%) say clients ask for this kind of service.
In general, professionals say clients are asking for a more comprehensive range of non-investment services including financial planning (50%), estate planning (34%), and even educating their family about money and investing (26%).
On the investment side, financial professionals report client interests run in highly specific areas such as tax-efficient investment strategies (40%) and environment, social and governance (ESG) strategies (29%).
An expanding role for financial professionals
Financial professionals have responded to growing demand for these services by assuming a wider range of roles with clients. Most frequently, financial professionals describe their role as that of a financial planner (76%). In this, they are taking on a broader set of responsibilities, helping clients establish goals and integrating services such as tax planning, estate planning, philanthropic planning and college funding planning.
Many are also finding success helping to educate clients on markets and investments as a financial coach (50%). Others still are honing their offering around a specific set of needs and establishing themselves as experts on retirement income (39%). Others see themselves providing support for overly emotional clients as financial therapist (34%).
Roles financial professionals play to clients
Financial Planner I help clients
navigate all of their
Financial Coach I educate clients
on markets and
Retirement Expert I advise clients
Portfolio Architect I build portfolios
Therapist I help clients rationalize their emotions about investing and the markets
Consultant I help clients with their
Mediator I help clients with family-related affairs (such as mediating conflicts, trust and estate planning, etc.)
The prospecting challenge
With two-thirds of financial professionals reporting that growth depends on winning new clients, the stakes have been raised on prospecting efforts. Despite wanting to leverage technology and digital strategies to support their client management efforts, these professionals are still reliant on traditional strategies for getting new clients.
The vast majority of financial professionals (85%) rely on referrals from their current clients. They see this word of mouth endorsement as a critical asset and an important dimension. The next two most popular prospecting techniques – getting referrals from other professionals such as lawyers and accountants (46%) and establishing relationships with the next generation of client families (39%) – both rely on a high level of personal trust and reputation.
Financial professionals are less enthusiastic about other marketing strategies. Although they have long been a staple in many prospecting plans, events and experiences are only effective for one-quarter of professionals (24%). Only 11% say email marketing has been effective in winning new clients. That number could change as more of these professionals leverage technology solutions like their customer relationship management systems.
Personal trust and reputation important when prospecting
Most Effective Least Effective
85% Referrals from my current clients and contacts
46% Referrals from other professionals (e.g. lawyers, accountants)
39% Establishing relationships across family generations
24% Events and experiences (e.g. client seminars, dinners)
11% Email marketing
10% Affinity groups (e.g. private social clubs, hobby clubs)
7% Social media engagement (e.g. LinkedIn, Facebook)
6% Advertisements and sponsorships
Finding the time to find new clients
Even as they say new clients are a key to growth, financial professionals have little time to dedicate to prospecting. The combined responsibilities of managing clients, managing investments, and managing a business leave them about as much time for prospecting as is spent filling out compliance paperwork.
On average, more than 60% of the week is spent managing current clients. This includes 26% of the week spent meeting with clients and another 22% managing client communications. On average, financial professionals spend only 13% of the week managing client investments.
When it comes down to it, financial professionals spend only 8% of their work week, or about half an hour per day, on prospecting activities. Even less time is spent on marketing (3%).
If financial professionals are to live up to high expectations for growth by bringing new clients and new assets to their practice, they will need to find new efficiencies in other areas of their practice.
The average week for a financial professional