The shift to goal based advisory

By Ravi Samalad |  25-05-20 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

A study conducted by Broadridge Financial Solutions, Inc., shows that financial advisers in the United States are accelerating the transition of their business models to offer more holistic financial wellness services like goal-based planning.

Interestingly, we are seeing a similar trend in India as more and more advisers are adopting financial planning approach as it offers many advantages. Goal-based investing helps investors avoid knee jerk reactions to the news by focusing on their goals. Further, it helps them have the right asset allocation in line with their goals.

Younger advisers are leading the trend

Fifty-one percent of surveyed advisers stated that there will be an increased focus on holistic financial planning within their practices moving forward. Younger advisers (under 40) are four times more likely than older advisers (over 55) to believe that the main value they provide to clients is holistic financial planning.

Team approach

As advisers aim to meet increasing investor demand for financial planning, survey respondents also expect to move toward a team structure as opposed to working in solo practices. In three years, nearly 8 out of 10 advisers expect to be part of a team.

Shift to fee-based advisory

The survey also revealed that the number of advisers with 75% or more fee-based assets under management (AUM) will increase from 51% to 67% over the next three years. We are seeing a similar trend among Indian advisers, especially after the emergence of Registered Investment Adviser Regulations. The percentage of advisers charging fee to clients remains low though.

How asset managers can build stronger relationships with advisers

Almost 80% of advisers are looking for asset managers to help them optimize their businesses, and 78% stated they want support on portfolio construction and risk management. However, only 25% of advisers were found to actively seek out new relationships with asset managers.

Advisers continue to seek assistance on digital transformation efforts, notably looking for support from asset managers on building a tech stack (57%, e.g., CRM, financial planning software, and data analytics) and strategies for outsourcing (41%).

Acquiring new clients

The survey also uncovered an opportunity for managers to provide support around generational and demographic shifts in investing. More than half of adviser respondents (59%) expressed interest in receiving content on how to market to women and minorities. Similarly, 71% of advisers expressed interest in acquiring new millennial investor clients.

Advisers cited whitepapers (or other thought leadership) and websites as the top preferred ways to receive content and support from asset managers.

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