The Top 3 Challenges Financial Advisors are Facing (Or So They Tell Me)

By Justin Shepard, Sales Development Representative on Friday, May 13th, 2011

I talk to financial advisors all day, every day.  Of the hundreds of conversations I have with advisors each week, the large majority are about data aggregation and how it can be utilized to help scale and grow their businesses.  However, though data aggregation is by far the most common thing we talk about, it is by no means the only.  

 

I’ve found that financial advisors have a lot on their minds. I’ve also found that in many cases, I’m not sure why—perhaps some find it easier to share certain thoughts or feelings with someone who isn’t a client or colleague, or maybe it’s just because they know I’ll listen—but for whatever the reason, they often choose to confide in me. And I’m glad they do. They brag about their golf handicap, and how many goals their kid scored in the soccer game last weekend—they tell me about a recent article they read, a new iPad app they just got that “will blow my mind”, or of how I’ve “never lived without having tasted a slice of their wives’ homemade apple pie” (Needless to say, I frequently end a conversation with my mind blown or stomach growling.)

 

But unlike tablet technology and homemade desserts, they also talk about things that aren’t so sweet.  I hear a lot about advisors’ everyday headaches, frustrations and anxieties—problems that they’re having, and issues that they wish to resolve. Obviously it’s nicer to hear about peoples’ pleasures than it is their pains, but I’m just as interested in listening to the latter as I am the former, because it fascinates me to see the ways in which these obstacles are overcome in the long run, and how by sharing these challenges with others in similar situations, common solutions can sometimes be found.

 

The top 3 challenges financial advisors are facing (or so they tell me):

 

1.) Attracting younger clients.

 

The more Baby Boomers continue to retire, and in some cases even die, the more I hear about advisors’ concerns with how to reach younger generations. For starters, unlike their Baby Boom parents, Generation X and Y grew up with computers, and are thus far more likely to be primarily accessible via the internet. This can create a serious problem for advisors who are much more accustomed to a traditional marketing approach as opposed to online marketing vehicles such as email and social media.

 

Another issue is that, much like auto insurance, many young investors are simply opting to use their parents’ financial advisor because they don’t know where else to turn—others are seeking advice from friends from college who apparently believe passing the series 6 and 63 along with a shiny new business card from XYZ Insurance Co. dawns them a fully qualified financial advisor.  Advisors are seeking young investors, young investors are seeking advisors, and they can’t find one another. The problem is, they both have the same problem—there is no marketplace for financial advisors.  There’s nowhere a prospect can go to shop for an advisor to fit their specific needs, and there’s nowhere an advisor can go to put themselves in front of prospects (that is, of course, unless they can manage to establish an online presence.)

 

2.) Broker-dealer restrictions and bringing held-away assets under management.

 

A lot of the complaints I’ve been hearing lately are from advisors with broker-dealers whose restrictions are limiting their ability to manage and bill on accounts held outside their broker-dealer. These advisors understand that BDs only get paid on assets held in-house, but many make the point that, if you’re a good producer and will eventually bring the assets in-house anyways, then why wouldn’t the BD not only allow, but encourage and help facilitate the advisor with managing those assets?  If that were the case, advisors could provide more holistic advice so their clients would be happy, they could easily increase their AUM by at least 10-15% so they themselves would be happy, and their broker-dealers would get happy advisors bringing more assets in-house. Everybody wins. But apparently, BD’s are not seeing it that way.

 

Similarly, many advisors are also running into prospects with great potential as prospective clients, but that have the majority (if not all) their investable assets in qualified plans with their employers. Advisors are looking for ways to sign these prospects as clients, but are unable to do so without the ability to manage their held-way accounts.

 

3.) Satisfying clients’ heightened reporting demands.  

 

In the wake of the economic downturn, and with waves of technological advancements bringing new possibilities and client expectations, many advisors have noticed clients—especially HNW clients—wanting more reports, and more accurate reports, more frequently. Rolling out a higher number of reports at a faster pace is in itself a challenge, but doing so while at the same time making fewer errors—without the proper technology—can be nearly impossible.  Investors are demanding round-the-clock updates on their portfolio performance, which cranks the heat up on both advisors and the operations staff, making a back office seem more like a sweatshop than an advisory firm.  The higher the client demand for reports, the higher the stress level for advisors, and the higher I have to hold the phone receiver above my head to prevent a stressed out advisor from damaging an eardrum.

 

If you’re a financial advisor and are currently facing any of the above challenges, or any other challenges not listed in this post, click here to schedule a time to speak with me—I’d happy to listen, and to do whatever I can to help find a solution.  

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