Many professionals in the financial services industry feel the pressure to maintain continuous growth.
But spotting high-impact growth opportunities is a hurdle for financial advisors and wealth managers.
We spoke with Chris Perry, president of Broadridge Financial Solutions, which recently released a joint survey with the Financial Services Institute looking at the growth opportunities within the wealth management industry in 2022.
The survey of more than 400 financial advisors highlighted the importance of leveraging digital technology to better meet practice goals, the need to engage the next generation of clients and the importance of social media outreach.
Perry shares insights from the study and how advisors can use these findings to upscale their practices in 2022. Here are edited excerpts from that interview:
How is technology shaping the advisory landscape in 2022?
According to Broadridge and FSI’s joint survey of financial advisors, a majority of advisors (92%) report satisfaction with their technology capabilities, but they still see opportunities for improved technology to better meet their practice goals. Most advisors (83%) argue that better technology tools would greatly improve new client acquisition, which is ever more important in an increasingly competitive landscape.
There are myriad technology tools out there, and advisors need things in a centralized place, so they can focus on prospecting, growing and operating their practices. As investors increasingly expect a more personalized experience, technology makes it possible at scale.
How can advisors use technology to foster deeper relationships with current clients and reach new prospects?
As we remain in a hybrid environment given the ongoing pandemic, videoconferencing is not expected to go away anytime soon, and it’s still an important tool for advisors to connect with new and existing clients. According to the Broadridge and FSI joint survey, 51% of advisors report that they are still conducting formal client meetings virtually – either via phone or Zoom. Further, advisors expect to increase their video-conferencing tools over the next 12 months. By leveraging video-conferencing tools, advisors can meet clients and prospects wherever they are, whenever their schedule permits, providing increasing flexibility and communication with clients and advisors alike. This also provides an opportunity for advisors to prospect outside of their typical geographic locale to reach a new client base.
Advisors can use technology tools to deeply understand, document and track each client’s needs, wants and wishes in line with their portfolio, inclusive of financial and environmental, social and governance, or ESG, goals. They will also continue to use digital communication tools, such as videoconferencing and compliant chat, to stay in touch. Finally, advisors can amplify their reach by using tools to educate and inform clients and prospects with artificial-intelligence-powered content from top publishers.
Where are you seeing the greatest opportunities within the wealth management industry in 2022?
According to a recent global Broadridge survey of 750 financial services firms, 33% of wealth management firms were categorized as beginners in their digital transformation journey, trailing behind other sectors in their digital maturity. This suggests there is ample room for growth and innovation within the industry.
The study also found that the three challenges wealth managers face when it comes to achieving digital transformation are keeping up with the pace of technological change, a lack of a road map for innovation and a need to modernize their information technology infrastructure. While these challenges remain, there is a great opportunity here for wealth managers to partner with third-party firms that can assist with their digital transformation journey and enable them to provide a high-touch, high-tech experience to clients.
Other opportunities within the wealth management industry in 2022 include the accelerated digitization of the investor-advisor experience fueled by newly set pandemic-related expectations; the need for high-quality, personalized investor education stemming from the explosion of new investors over the past year; increased demand for new asset classes like digital assets and alternative investments; and the incorporation of ESG in a personalized way into all aspects of wealth management – from financial planning to portfolio construction and beyond.
How can advisors engage the next generation of clients in preparation for what the media has dubbed “the great wealth transfer?”
According to the Broadridge and FSI joint survey, 89% of advisors have engaged or plan to engage with additional generations of existing clients, such as children or grandchildren, demonstrating that advisors understand that sometimes the best way to reach the next generation of investors is by tapping into their existing client base. Advisors are very proactive in bringing this up with their clients, as 70% of these advisors directly raise the topic with their clients and 55% offer to build the financial literacy of clients’ children or grandchildren.
Advisors can also involve heirs and family members in philanthropic efforts, involve them in ESG decisions, and offer investor education programs or more diversified services beyond investments, such as financial planning, trust and philanthropy, which naturally create more touch points.
How can providing education help advisors improve their businesses?
First, education is a core way for advisors to gain net new assets. Education helps investors understand what role investing has in financial wellness and why a diversified portfolio supports most goals.
Second, I believe that advisors in the future will be differentiated by people who educate and people who don’t. We have been talking to some registered investment advisors that have people who do nothing but education. It’s already very commonplace in the workplace for 401(k) providers to have education built in. We think on the wealth side, it’s going to be right there.
Third, advisors need to be provided education and support to be able to sell new product categories like alternative investments and crypto, and the best ways to incorporate personalization, direct indexing, and ESG into their practices.
As social media plays an increasing role in investors’ financial decisions, how can advisors use these platforms to grow their business without becoming just another voice in the crowd or running afoul of regulatory authorities and compliance departments?
It’s important to acknowledge that social media has become an increasingly important tool in reaching new prospects. According to a 2021 Broadridge survey of financial advisors, 40% of advisors report that they have obtained a lead that has become a client through social media. This number is even higher among advisors with a defined market strategy, demonstrating that social media can be a powerful marketing tool for advisors who can leverage these platforms efficiently.
Advisors should use compliance departments as an enabler for social media and work with them to craft strategies that are supported by and beneficial for the company.