Most financial advisors' thinking is too short-sighted and they aren’t planning for business growth over the next five to 10 years because they’re “too caught up in the now to look ahead,” according to a new report from SEI.

SEI presented the report, “Advisory Firms in 2030: The Innovation Imperative,” at the 2019 Financial Planning Association annual conference Wednesday.

The research was designed to better understand the current and potential future state of the financial advice profession, according to SEI, which provides investment processing, investment management, and investment operations solutions.

“Emboldened investors are impacting every aspect of the industry. Many advisers and planners are at an inflection point. Our research shows they may be caught up in day-to-day tasks or facing a digital inertia, and not devoting their time and resources to future planning,” according to John Anderson, managing director of practice management solutions at SEI’s independent advisor solutions.

“Today’s pace of change is likely as slow as it will ever be, and advisers and planners cannot afford to take a wait-and-see approach to the future,” he says.

Current state of the advice industry

Most advisors just aren’t planning ahead, according to SEI.

More than half of the respondents, or 55%, said they have no business plans currently in place. Of those respondents, 42% keep meaning to create a business plan but haven’t gotten around to it, while 18% believe a plan is unnecessary.

Advisors haven’t truly differentiated themselves or their businesses in any meaningful way, SEI says.

Respondents were asked to select a descriptor that best described their primary differentiator, and more than half of all respondents selected a descriptor that will likely be difficult for consumers to translate into value.

Nearly a third, or 28%, selected “offers life planning and financial planning,” followed by 42% who picked “fosters personal connections.”

Advisors aren’t focused on adapting their services to meet changing client trends and preferences, SEI notes.

Two-thirds of respondents meet with clients in their offices, compared with 17% who report meeting at a client’s residence, and only 9% report meeting with clients virtually.

“This research should serve as a wake-up call for all of us as financial planning professionals,” according to Evelyn Zohlen, president of FPA.

“Too many financial planners are ignoring today’s shifting consumer demands and neglecting planning for the future at a time when these topics demand our attention. Opportunities exist, and those who can bridge the gap between automation and human connection will be among tomorrow’s winners,” she adds.

SEI and FPA conducted eight in-depth, one-on-one interviews with financial planners for the research report. They also conducted an online survey in August 2019 of 436 financial planners (primarily owners, managing partners and lead planners) representing a variety of experience and years in the business.


What Advisory Firms Should Do to Ensure Growth Over the Next 10 Years

Look beyond tactics and start thinking about horizons longer than 12 months. Will your value proposition survive the next 10 years? What can you do to invigorate it to truly differentiate your business? If significantly increasing AUM is your most important goal, think more creatively about how you can achieve that. You may need to redefine your value proposition and adopt services that meet your target market's needs. SEI's Advisory Firms in 2030: The Innovation Imperative

Segment your clients to anticipate their future needs. Why not think about adapting to clients' varied needs by segmenting clients and tailoring experiences for each client segment? Identify at least one niche/market segment with which you've been effective, and think about ways to attract more clients, like those who meet your niche profile. SEI's Advisory Firms in 2030: The Innovation Imperative

What are you waiting for? Schedule two full days on your calendar right now to build a framework for your 10-year strategic plan. Is there a way to shift from generalist to specialist? What do you do exceedingly well? How will you anticipate clients' appetite for more personalization? Think about how you can attract younger clients and provide more than lip service to multi-generational families. SEI's Advisory Firms in 2030: The Innovation Imperative

Listen more to your clients. Develop a client advisory board that's focused on your clients — not you — and include at least one millennial on the board. Ask what clients appreciate/admire most about other service providers they routinely patronize (e.g., hair salon, where they service their car, tailor). SEI's Advisory Firms in 2030: The Innovation Imperative

Audit and assess your technology needs. If your future success is predicated on being able to do more with less (efficiency), think about the gaps in your technology suite and what you need to achieve scale. Try new digital technologies with all clients in mind (e.g., tools for younger clients to help with budgeting and cash management). Talk to clients about tools and technology they would like to access. Incorporate your technology plan into your strategic plan and allocate investment accordingly. SEI's Advisory Firms in 2030: The Innovation Imperative