Tags: Industry Trends

The world of the financial advisor is always changing and evolving, and that is good news for industry professionals and their clients. Where once there were only expensive full-service brokerage firms, these days there are dozens of discount brokers offering stock trades for less than $10. Where once there were costly managed mutual funds, these days there are robo investors, exchange traded funds, and low-cost index funds.

Through it all, smart practice owners have changed and evolved, altering their business models, building on their past successes and looking for creative ways to improve efficiency and do more with the same level of resources. Advancements in financial industry technology have helped to drive these improvements in efficiency and client service, with new services and a modern approach to serving the needs of every client.

From services like eMoney Advisor and Wealth Box to help clients manage their portfolios and communicate with their financial advisors to advances like Truelytics and RegEd that help practice owners optimize their operation and stay compliant with the ever-changing world of industry regulation, technology is changing the way financial advisors and wealth managers serve their clients.

The Rise of the eAdvisor Model

The rise of eAdvisors has been another significant event in the financial industry. While eAdvisors were nearly unknown just a decade ago, these days they are routinely outpacing their less technically savvy counterparts. If your practice is not yet using the eAdvisor approach, you could be missing out on a golden opportunity to better serve your clients and improve your investment returns.

A recent Fidelity study showed just how significant the advantages of the eAdvisor model has been, and how improvements in technology are driving better performance and allowing financial advisor and wealth managers to better serve their clients. Perhaps most significantly, that study showed that there is a powerful link between the use of technology in a practice and the metrics for advisor success in that firm. The study went on to show that eAdvisors who used two times the online resources of their less technologically advanced peers outperformed in many different ways.

Far-Reaching Implications

The results of the Fidelity study underscores the importance of technology for financial industry professionals, and the advantages of the eAdvisory model have implications across the board. From independent advisors and brokers to the owners of large wealth management practices, every practice owner can benefit from the eAdvisory model.

Just as importantly, that Fidelity study also shows how ignoring the power of technology and failing to follow the eAdvisory model puts practice owners at risk. Advisors who fail to take advantage of the power of technology risk being left behind and losing ground to their more technologically-savvy peers. If you want your financial advisory or wealth management practice to succeed, you should pay careful attention to the rise of the eAdvisory model and look for ways to use that model in your own day-to-day operations.

A Rare Breed

The metrics used in the Fidelity study, and a number of similar studies, are quite illustrative. For one thing, the study showed just how rare true eAdvisors really are at this juncture. More specifically, the study found that only 30%, or 3 in 10, practices surveyed qualified as eAdvisors. That means there is still significant room for growth in the world of eAdvisors and plenty of opportunities for enterprising practice owners.

The study also found some interesting metrics regarding eAdvisors vs. non-eAdvisors, and those findings are further proof that the eAdvisor model is the best model for success. One of the most interesting findings was that the typical eAdvisor had assets under management (AUM) that was a full 40% higher than their non-eAdvisor counterparts. Growing AUM is a major issue for all practice owners, and that makes these findings particularly important.

Richer Clients - Higher AUM

The comparison of eAdvisors and non-eAdvisors further found that eAdvsiors have a significantly higher percentage of millionaire clients. More specifically, some 35% of eAdvisor clients boasted a 7-figure net worth, versus just 28% of clients at non-eAdvisor firms.

There was also a significant difference in the number of clients served, pointing to the greater efficiency of the eAdvisor practice model. The Fidelity study found that the typical eAdvisor practice was able to serve 55% more clients, and that means more money, more assets under management and a more efficient operation.

Attracting Younger Clients and Safeguarding the Future

Perhaps just as significantly going forward, the Fidelity study also found that eAdvisors had a much higher percentage of younger clients compared to their less technologically-savvy peers. A full 37% of eAdvisor clients were members of Generation X and Generation Y, compared to just 31% of clients at non-eAdvisory firms. Since younger clients represent the growth engine of the financial industry, this is probably one of the most important statistics in the entire eAdvisor study.

If should come as no surprise that Generation X and Generation Y clients find the eAdvisory model compelling. From streaming movies and binge-watching TV shows on Netflix to downloading their favorite books on Amazon, members of these two generations are used to doing everything online. The eAdvisor model is a direct extension of similar online services, and further proof ot the sustainability and popularity of this new way of doing business.

Enhanced Levels of Satisfaction

The level of advisor satisfaction was also higher at the eAdvisor firms participating in the study. A full 82% of responding employees of eAdvisory firms said they were satisfied with their careers, compared to just 77% of employees at non-eAdvisory firms. Employee retention is a key concern at many financial advisory and wealth management firms, giving practice owners one more reason to adopt the eAdvisor model going forward.

As you can see, moving to the eAdvisor model has many significant benefits for the owners of wealth management and financial planning practices. From greater efficiency to higher levels of client and employee satisfaction, there are many factors behind the outperformance of eAdvisors compared to their old-school peers.

Greater Levels of Efficiency

There are many ways in which the greater efficiency of the eAdvisory model manifests itself in the day-to-day operations of the firm. For one thing, eAdvisors are much more likely to come to client meetings armed with tablet computers, allowing them to execute transactions and access timely information right from the conference table. Brokers and advisors at eAdvisor firms are also more likely to offer their clients a comprehensive picture of their portfolios, using data aggregation technology to assess performance, make recommendations and lower investment costs. This kind of collaborative client platform can improve retention, increase AUM and provide a host of benefits for practice owners and individual investors alike.

The world of technology has changed the face of the investment advisor, giving practice owners added flexibility and their clients better results and lower costs. If your practice has not yet adopted the eAdvisor model, now is the perfect time to act. For some time now, eAdvisors have been outperforming their peers, with greater levels of efficiency, higher average client net worth and enhanced client and advisor satisfaction. These trends are likely to continue in the future, giving practice owners even more reason to move to the eAdvisor model.

You May Also Be Interested In Reading: Top 6 Technologies That Financial Advisors Are Adopting in 2017

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Disclaimer

The above article is meant for information purposes only and is not intended in any way to provide legal or other advice for any specific situation.  Readers always should consult their own tax, accounting and legal advisors before taking any action related to the above article or subject matter.

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