The financial advisory industry could reach $850 billion in investible assets annually for the next decade, according to Pershing, but the impact of a slow recovery since the financial crisis of 2008 is still being felt by many firms.
Not all advisors will capture their share of future growth. To provide a guideline for success, Pershing outlines four strategies to help advisors generate income, earn a reputation for providing quality advice, and establish a sustainable business:
- Elevate the value of advice
- Reimagine the right talent
- Adopt a business-like approach to service delivery; and
- Create a culture of compliance.
Of those four strategies, finding the right talent might be the most important, said Kim Dellarocca, director and head of head of segment marketing and practice management at Pershing. The industry will need to add a projected 237,000 advisors over the next decade, to meet the demand.
Many owners of independent firms will be retiring in the coming years, so those exiting the business will have to be replaced and a new generation of advisors will have to be developed.
Some of the new advisors will come from college programs, Dellarocca said, while others will be people making mid-career changes. Becoming a financial advisor is increasingly thought to be a good career, she observed, with the prospect of excellent earnings and the respect accorded to valued professionals.
Merely recruiting new advisors wont be enough, though.
More firms need to have well-structured training programs, Dellarocca said.
According to the Pershing, the advisory industry requires greater focus on people management skills and long-term staffing solutions. Advisory firms must build an infrastructure for moving individuals through the ranks and offering them a clear career path.
Beyond success in recruiting and training new advisors, Pershings report emphasizes that advisory firms must acknowledge investors' changing advice consumption patterns. The consumerization of technology affects the relationship between investors and advisors, creating a growing sentiment that consumers can manage their own financial affairs.
Technology has a positive side, too. Advisory firms can improve their productivity, control costs and realize scale, Pershing points out, by finding efficiencies in workflow through the use of technology as well as human capital. Addressing compliance, the study urges advisory firms to adopt a proactive approach to regulation by maintaining operating and servicing standards that are well above required minimums. Putting clients first is not only a prudent approach to compliance but also sound business practice.