The independent financial advisor industry is undergoing rapid technological innovation and growth in client service expectations that are collectively leading to big new opportunities — as well as big new challenges — for firms of all shapes and sizes.
In the substantial experience of Erich Holland, these and other trends mean financial advisors must rethink their value propositions as well as their traditional approach to serving clients and operating the business.
As the head of sales and experience in SEI's advisor support business, Holland is in a good position to know such things.
"We hear a lot of interesting things from our clients and prospects every day about how their firms are evolving," Holland says. "At SEI, we've been serving the independent advisor space for 30 years, and our value proposition has always been about helping advisors allocate their time to the highest-value tasks and efforts. This is more important today than ever before."
According to Holland and others, never before have clients been placing so much demand on their advisors. Drawing their expectations from their broader lives as 21st century consumers, Holland explains, clients are demanding far more holistic, personalized and digitally enabled services from their financial advisors, and this is requiring advisors to make some pretty big changes of their own.
The collective force of these pressures, Holland argues, is driving advisors to revisit their value proposition and the foundations of their go-to-market strategy. He says those advisors who are willing to ask and answer tough questions can hope to stand out in the years ahead, while those who fail to innovate will surely fall behind.
According to Holland, advisors who feel like they are being caught flatfooted by the current moment should consider the following five trends, each of which speaks to a different part of the advisor's value proposition. Some may be more relevant to a particular advisor than others, he explains, but all should provide some important food for thought in today's dynamic marketplace.
1. Fiduciary differentiation is dead.
As Holland argues, being a fiduciary is not a differentiator in 2023, demonstrated by the fact that 75% of all outward bank and wirehouse advisor asset flows in 2022 went to fee-based, fiduciary advisor accounts.
"This is really telling," Holland says. "If you look back even just 10 years ago, calling yourself a fiduciary really meant something. It allowed advisors to hold themselves out as being different, and that worked for a while, but recent and ongoing regulatory changes have done a lot to reshape the industry."
Holland says banks and wirehouses are making their own changes to account for these outflows and the increasing popularity of the independent model.
"The banks and wirehouses are still able to bring a massive amount of support and infrastructure to their advisors, and that remains an advantage," Holland notes. "The connection to a bank or wirehouse means advisors can bring in other services and solutions that can be harder to source for independent RIAs outside of special partnerships."
Another key part of this trend is the recruiting angle, Holland suggests.
"Younger people are flocking towards the independent model," he says. "It's just so challenging to go down the old route, where you join a wirehouse or bank and you have to immediately build out your book right away. The new way is to do more teaming in the independent space and to learn how to be a holistic wealth manager."
2. More access, more problems.
According to Holland, the pandemic helped to spur unprecedented growth in self-directed, digital brokerage platforms, with both positive and negative results.
"These platforms are driving investors to have a heightened awareness of the costs of investment accounts, but these investors are also experiencing more problems with these accounts, presenting an opportunity for advisors to reiterate their value proposition," Holland argues. "What is perhaps the scariest thing here is the irrational exuberance."
As Holland observes, everyone with a smartphone can now be a day trader, and they also have more access to tools, analysis and raw market information than ever before. This state of affairs has created a lot of investors who significantly overestimate their market-timing prowess.
