Financial advisors navigate a challenging but necessary role when it comes to helping their clients manage their money. However, it is believed that a significant percentage of financial advisors will retire in the next five years. Few young professionals are willing to enter the industry for a variety of reasons, but the need for financial advice is not going to dissolve. As with other industries, wealth management is subject to change, especially in technological aspects, and the future of the industry is somewhat in flux. In order to meet demands, the wealth management industry will simply have to adapt.
Increasing Age Gap
In the near future, it is believed that roughly one-third of financial advisors will retire, and with fewer than half of these advisors having concrete succession plans, a decrease in the profession seems inevitable. Additionally, the vast majority of existing financial advisors are over the age of 40, and with those in the Millennial or Gen-Z generations entering the workforce or inheriting estates, financial advisors are recognizing a distinct age gap that is creating a disconnect between advisors and their clients. In order to account for these gaps, financial advisors will need to adapt to technological advances as well as client priorities, and searching for individuals to fill the space left by retirees is also a common priority.
Technology and the Rise of Robo-Advisors
With an expected decrease in wealth management professionals and a projected anticipation for new technology, it should come as no surprise that the industry will be making technological changes. Perhaps the most notable shift will come in the form of robo-advisors; younger individuals may prefer to utilize artificial intelligence in this way as it could be more accessible, and if there are fewer financial advisors in the future, robo-advisors provide a way to make up for limited resources. The role of the financial advisor may shift to accommodate technological advances like robo-advisors to ensure that the guidance provided to clients is suitable and accurate.
Regulations and taxation are always subject to change, and this is a considerable concern for financial advisors. Because the current climate does not provide a clear idea of what changes may occur as technology and the practice continue to advance, there is more uncertainty surrounding the idea. For financial advisors, the important thing is to be ready for change. Adaptability will be key.
The wealth management industry is likely to experience some significant changes in the coming years, and being prepared for what might come is crucial.