Some industry experts expect consumers will increasingly earn income from nontraditional, un-salaried jobs and believe advisers stand to benefit from this so-called "gig economy."
As Fidelity Labs vice president Kim Langway recently explained to InvestmentNews, self-employment may soon comprise half of the U.S. work force, and 80% of self-employed people today say they wouldn't go back to traditional full-time jobs. Ms. Langway recommended advisers become business coaches as well as financial planners, but what exactly does that look like for advisers looking to serve these clients of the future?
The first step is to ditch the preconceived notions some people have about the term "gig economy," said Dan Sachar, vice president of enterprise innovation, Ladenburg Thalmann. While tech startups like Uber, AirBNB and TaskRabbit may have popularized the term by employing an army of independent contractors, not all self-employed people have small accounts, such as a successful real estate agent.
The other is to remember that the gig economy doesn't mean it's the only job someone has, Mr. Sachar said. Increasingly, clients with full-time jobs or even retirees will be finding ways to supplement their income via self-employment, meaning sporadic peaks and valleys in income that can complicate matters for advisers.
"Their income is not steady, but it can be meaningful. An independent contractor doesn't necessarily mean an Uber driver," Mr. Sachar said. "Advisers looking to go after assets and solve pain points for independent contractors … step one is don't write them off as low-income workers without meaningful assets."
One pain point these workers have is with taxes. Gig economy workers are entirely responsible for making their own deductions and tax payments, which can equal a lot of time, effort and stress, especially for someone earning a substantial income through self-employment.
To solve this problem, Ladenburg Thalmann invested in Track Technologies, a fintech startup building software to calculate, withhold and submit estimated tax payments for self-employed worked. The company is rolling the product out to advisers at its five subsidiary firms: Securities America, Triad Advisors, KMS Financial Services, Investacorp and Securities Service Network.
Another area advisers could be useful in the gig economy is with retirement planning.
Without an employer-sponsored plan, non-salaried workers are left on their own. Advisers could help folks determine which sort of accounts to open — a traditional IRA, a SEP IRA, SIMPLE IRA, etc. — and ensure clients remain disciplined about regularly saving, said Terry Dunne, Millennium Trust Company senior vice president and managing director.
For example, someone with a SEP IRA can contribute up to 20% of net income to a maximum of $56,000, which could be really helpful for a client earning significant income from self-employment.
"The adviser needs to be clear as to what are the savings objectives of these individuals and create discipline for them so that they can easily contribute," Mr. Dunne said.
Millennium Trust sees the gig economy as an opportunity to expand its retirement savings business. The firm has a new tool to help determine which sort of retirement vehicle would be most appropriate for a client's needs, Mr. Dunne said.
Mr. Sachar also sees an opportunity for advisers to use technology to automate retirement savings for the gig economy. If Track can already calculate tax withholding when money hits an account, why not figure out how much to automatically invest in retirement?
While not available yet, this is something Mr. Sachar said is on the product roadmap.
Financial institutions across the industry are working to arm investors with tools they need to serve these workers, Mr. Sachar said. All that's left is for advisers to realize is the services they can provide to the gig economy.
"[Advisers] can actually help them save time and effort and remove some their pain; make sure they have enough money for taxes; take advantage of the tax code to invest as efficiently as possible," he said. "If you can figure this out and understand that its not just portfolio management, [it is] helping them with administration and headaches. It's a growth opportunity."