The financial advisor market landscape is shifting, and two recent studies provide a glimpse as to how that demographic – and your book of clients – will look in 2020.
Sponsored by the National Association of Insurance and Financial Advisors and presented at the GAMA Foundation’s recent Leadership and Management Program Conference, the studies delve into how key marketplace and demographic shifts will affect insurance and financial advisors, ultimately reshaping the industry in little more than five years.
The findings examine both the market of the future and the advisor of the future. Insurance Business spoke with NAIFA President John Nichols to learn more about five of the most critical trends producers and advisors will face in the coming years.
1. Gen Y enters the workforce
Most financial advisors are well aware of the opportunities presented by the soon-to-retire Baby Boomer generation. However, Nichols points out that Generation Y — those 35 and younger — comprise a much larger market.
Roughly 90 million strong, Gen Y will comprise 56 million members of the workforce by 2015 and spend at a higher rate than baby boomers.
“That next generation is just such a huge, huge potential for financial advisors,” Nichols said.
Engaging Gen Y will require unique resources, however. The average financial advisor is currently in his or her mid-50s and somewhat slow to adapt to the technology trend. Hiring young talent to engage Gen Y is critical, as is adapting to technological advances like video conferencing and social media engagement.
2. The middle market and small businesses present the greatest opportunity
With such a large influx of workers, competition among financial advisors for the wealthiest clients will intensify and more advisors will need to focus on the emerging middle market to succeed.
This means working with clients who may not have the estate planning needs or investment advice of a wealthier individual, but will need greater education to become financially literate. (continued.)
#pb#
“Counseling on how to save for retirement, college planning and disability insurance—these are all going to play a critical role was we move forward,” Nichols said.
Small business employment is also expected to grow, offering greater market potential to advisors.
Peter Hoopis, who spoke at the GAMA conference, mentioned that in his hometown of Lake Forest, Ill., there are approximately 375,000 businesses — yet market penetration is at 1 per cent.
“Doesn’t that give us a wonderful opportunity?” Nichols said.
3. Client diversity grows
As advisors begin to expand to the middle market, they will need to develop the skills to serve a client base growing increasingly diverse.
GAMA pinpoints second-generation immigrants, socially mobile women, single-parent families, unmarried couples and same-sex spouses and families as growing demographics in need of specialized attention. Capitalizing on niche relationships and statuses is a good way for advisors to build a reputation in their community for serving these populations.
“Advisors need to serve the modern family by assembling quality statistics and market information on alternative families, building a brand around trust and service,” the research found.
Learning from other generations and outside advisors and colleagues is also critical in understanding clients’ needs.
4. Demand accelerates for non-financial services
In the vein of superstores like Wal-Mart or online services like Amazon, Americans are growing more accustomed to having all their needs fulfilled in one place. As such, GAMA expects clients to demand a broad range of financial, as well as non-financial, services and products from their advisors. (continued.)
#pb#
To fulfill these needs, advisors will need to develop a niche and also engage in their community to build collaborative relationships with outside professionals that can serve a client’s needs.
“The consumer is getting very used to one-stop shopping. Your job is to make sure you fulfill that need,” Nichols said. “Collaboration and teamwork are necessary, as opposed to the traditional model of one advisor taking care of everything.”
To establish these vital relationships, Nichols recommends becoming entrenched in both your physical community and online communities established through technology like social media. A strong public relations team is also vital for success.
5. Financial services demands outpaces growth of advisor workforce
According to government labour statistics, in order to meet the nation’s financial needs, the financial services profession will need to grow more than twice as fast as the overall workforce by 2020. That’s a tall order.
“If the Bureau of Labour Statistics forecast is accurate and the industry fails to staff appropriately, then other professions such as bankers and attorneys might step in to fill the financial services function,” the research warned.
If financial advisors aren’t doing so already, it’s time to ramp up hiring in order to fill that need and secure the future of financial services to advisors and agents.
The future of the advisor
Learning about these trends and preparing to meet them will separate the winners from the losers come 2020. However, several key aspects of the financial advisor’s role will remain the same.
“When it comes to financial advice, whether that be managed money or an insurance policy or something else, people want to work with people. It’s a very personal experience,” Nichols stressed. “People want someone they can trust to share their dreams, their health and their wellness. They want to work with people with the credibility and capability to deliver.
“Financial advisors need to be positioning themselves in that way. This is going to be a big deal for the next three, four, five years.”
