The future of the business is clear: It's advice, not investing

40 Under 40 award alumni discuss where they see the profession heading

Jun 22, 2019 @ 6:00 am

By Ryan W. Neal

Many investors still think of advisers as the financial services equivalent of used-car salesmen.

Even if it's an unfair stereotype — both for advisers and the auto sales industry — changing the perception is critical if the advice industry is to keep up with rapidly changing technology and investor demographics.

The future of advice isn't selling investments, many of the InvestmentNews' 40 Under 40 awards alumni said at a May 7 think tank in New York City. The future is life coaching, relationships and comprehensive wealth management, and embracing this new reality is what will drive the future of the business.

It is already influencing hiring.

Several attendees said their firms are looking for people better at the "soft skills" of advising rather than someone who excels at investment management or product sales. Some also said they are trying to hire more women and people of color to build better relationships with a more diverse populace.

Some are even looking outside of financial services to tap into new pools of talent.​

For example, Kathryn Brown, co-founder and principal of Morton Brown Family Wealth and a 2019 InvestmentNews 40 Under 40 recipient, recently hired a "self-described data geek" to "create the backbone of data to drive everything that we are doing."

Shifting away from investment management in favor of advice and planning also will open the industry to larger segments of the population and to many people with less wealth. Data and technology will help advisers serve these clients profitably, Ms. Brown said.

"How else can we take things we're doing and make them more efficient and move them off our plate without having to beef up the advisory staff?" she asked attendees at the Future of Our Business think tank.

One efficiency suggestion is for advisers to decide on a niche of clients to serve and then build out infrastructure dedicated to meeting their particular needs. Advisers will have to serve more clients, meaning segmentation also will be critical. Advisers of the future also will need to open up to the idea of letting go of clients who aren't a fit, or at least serve them with digital advice.

Rethink fees

And if advisers are going to be providing more financial advice than investment management, they also are going to have to rethink fees. Millennials, in particular, may be much more willing to work with an adviser charging a subscription fee for services than a percentage of assets under management, said Nina O'Neal, partner with Archer Investment Management and a 2016 40 Under 40 winner.

Supporting a subscription fee also could help advisers reach next-generation clients who may be in line for an inheritance or are working hard to build their own wealth.

"It's how millennials pay for things," Ms. O'Neal said. "They want to know what they are paying for and what they get."

Tyrone Ross, financial consultant with NobleBridge Wealth and a 2019 40 Under 40 winner, pointed out that fintech startups as well as traditional financial institutions like Charles Schwab are embracing fee-for-service pricing instead of the AUM model.

"Our industry severely underestimates the Schwab move," Mr. Ross said. "AUM is going to die a horrible death."

Of course, no discussion of the future is complete without mentioning technology. Mr. Ross said consumer tech giants will continue moving into financial advice and investing, but that it is not necessarily a threat to advisers. Technology companies want to serve as large a segment of the population as possible, but advisers could use their innovations to continue delivering a higher level of service for wealthier people.

"If Google came up with a CRM, that might be kind of nice," Mr. Ross said.

The think tank attendees also imagined the algorithms that power companies like Amazon and Netflix bringing advancements to financial planning software.

If technology can identify an opportunity for a client to refinance their home or save money on taxes, it could help advisers have deeper conversations that help people live more meaningful lives — instead of just helping them put money away for retirement.

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