In the wealth management industry, independent financial advisors have been met with a number of challenges that they must strategically navigate if they want to obtain success. Even for financial advisers who work with larger firms, the expectations of the role are demanding. Knowing about the kinds of challenges advisors are currently facing can help them prepare ways they can mitigate and overcome whatever comes their way.
Increased Demand for Independent Advisors
Advisors who operate outside of a firm are in high demand as individuals seek those who abide by the fiduciary role and lack any ultimatum. While this increase in demand can easily lend itself to more business opportunities, it also means that the existing independent advisors may be stretched thin. Managing time, resources, and client expectations has become more difficult as the result of this surge in demand for independent advisors.
Complex Client Expectations
As more individuals from younger generations are acquiring wealth and seeking ways to grow their net worth, advisors are expanding their portfolios to include more inexperienced and uninformed individuals. While novices are certainly welcome, this increase can force advisors to devote more time to managing client expectations, communicating ideas with care, and educating their clients on healthy financial practices. Advisors who have worked primarily with experienced investors during their career may find this task challenging simply because of the age differences and lack of experience.
Automation and Fee Compression
One of the most pressing developments for financial advisors is the integration of robo-advisors. For many, it is easy to understand the need and desire for automation in this industry; with high demand for financial advice and guidance, some individuals may be better off with automated programs offering tips and education. However, what this means for financial advisors is that their roles must shift to accommodate this development. Additionally, because most forms of automated financial advice have low or nonexistent fees associated with the services, this adds pressure on financial advisors (especially those working with large firms) to cut back on their own fees in order to appeal to the changing demands of their client pools. Independent advisors may be at a disadvantage, as well, as larger firms have greater access to advanced technology and automated systems that can provide them with an additional business avenue.