The Top 3 Challenges Financial Advisors Face Today
Being a financial advisor is challenging. With an industry employment rate that will grow 15 percent from 2016 to 2026 according to the Bureau of Labor Statistics, it is more important than ever to continually grow your business and expand your capabilities.
And it’s not an easy battle. You’re facing new self-serve technologies, competition from big firms, and a volatile market that can cause uneasy feelings among potential clients.
Here are the top three common challenges that today’s financial advisors run into, with advice for how you can effectively navigate these roadblocks to work toward acquiring better business, better clients, and better revenue.
Maintaining Your Own Operations
Running your own financial services business can derail your hopes of offering financial planning advice. That’s because business operations and developing an overall business structure takes time — a luxury most financial planners don’t have.
And if a lack of time isn’t bad enough, add to this burden the money required to start your own firm. Wealth Management estimates that you need anywhere between $50,000 to $100,000 on hand, and that’s just to start. Costs can add up with rental space, licensing, training, and even a deposit with a new broker-dealer.
Also, shifting customer demands create an even bigger hill to climb. You have to prove yourself and showcase why a financial advisor is important for the millennial, the seasoned investor, the retiree… the list goes on. Each client has different touchpoints and different ways of communicating, and this needs to be factored in to how you offer financial planning services. Thus, you have to exercise business control and direction before you can start the advisory process.
As an advisor trying to open your own firm, you likely feel like Sisyphus, battling uphill with a boulder of operations. If time and money are not on your side, the more affordable (and considerably more practical) approach is to look into joining a firm. The system of support, book of business, and resources at your disposal will make for an easier transition than fighting to keep your business above water.
Finding a Unique Value Proposition
In a market that is challenged on all sides by easily accessible financial planning tools, robo advisors, self-help options, and big-name firms, how do you stand out to attract more business? It’s one of the biggest challenges that every financial advisor faces. If you find yourself asking this question often, you’re not alone: in a survey conducted by Practical Perspectives, roughly 60% of advisors identify attracting new clients as their leading challenge. So what does it take to rise above the noise?
For one, it takes understanding your unique value proposition, and a good first step toward identifying this is to exercise emotional intelligence. By doing so, you can understand your emotions — and value — as well as the emotions and motivators that drive your clients.
You need to showcase the value of getting to talk to someone else — a human who can understand fears, challenges, and goals. You can sympathize and empathize with clients, walking them through
the most appropriate investment strategy based on their age and financial status. You can explain market fluctuations to them, and earnestly talk with them about how their investments should be shifted for long-term planning — and why. This is something that technology and algorithms can’t do with a purely data-based decision making model, so it’s important to stress your personal approach to clients.
Another way to create your unique value proposition is by offering alternative investment opportunities. Many financial advisors are at the mercy of their brokerdealer, and either can’t get alternative opportunities approved fast enough or don’t have the flexibility to offer them. Seek alternative investments that aren’t liquid or aren’t traded and offer these to your clients as a way of standing out from the crowd.
Growing Revenue and Profitability
A strategic approach to increasing profits is by offering a more diverse set of services to clients. Typically, clients have to consult a number of industry-specific professionals to get a good idea of their financial health, creating their own “personal financial advisory board.” From estate to auto and even tax planning, clients are spreading themselves (and their assets) thin. But by offering more varied services to your clients, you not only increase your appeal as an advisor, you also grow your share of wallet and profitability.
Consider this: beyond expertise in unique investment opportunities, what if you offered tax planning services to your clients? According to a study conducted by Financial Planning, 63% of advisors don’t offer tax planning services. What if you could offer this? Or what if you could offer estate planning services? Instead of working across a broad spectrum of professionals, a client could use you for multiple services.
By offering more services, you could upsell clients on your services to increase your profits. And if your clients use more of your services, you will manage more of their assets and have a better understanding of their financial health.
While the world of financial investing and planning is challenging, understanding these challenges can help you better plan for your growth ahead. Considering the cost of doing business, using emotional intelligence to find your value prop, and diversifying your services are tools that can aid you on the financial advisor battlefront.