With the rise of roboadvisors like Betterment and Nutmeg, the financial advisory sector is undergoing a dramatic makeover. According to data from InsideBitcoins, the U.S. robo-advisor industry is set to hit $1 trillion in 2020- a 40 percent year on year increase. With it, the financial advisory sector has seen a marked decline in use, especially in the 18-34 years consumer bracket. This has been even more apparent during the recent pandemic. Improved accessibility to self-investment tools and more free time in lockdown has led to an explosion of young consumers looking to start investing money. Amid the volatility of the markets, overnight changes, and understandable edginess of consumers, here is how the financial advisory sector is coping- and what the future may hold.
The Demand For Financial Advice
With millions of small businesses struggling post-COVID-19, many of them are looking for advice on how to keep their doors open, keep employees on the payroll, and manage their finances. Financial advisors have recognized this shift and are responding by slowly providing more financial support to small business clients. Advice on cutting business costs after COVID-19, government-backed loans, and financial strategies to protect small businesses like securing workers compensation insurance have now become a normal feature of many financial advisors’ conversations.
Financial Advisors Are Switching Their Target Audience And Services
With unemployment levels increasing daily and personal debt also rising, financial planners are finding themselves having to change the way they approach customers and the advice they offer. No longer is the focus mainly on investment advice and retirement preparation but instead, financial planners are now focusing on providing immediate financial education and management advice to clients or businesses struggling in the aftermath of the pandemic.
The target audience for financial advisors has also seen a dramatic change in the last few months. Demand for financial advice is growing particularly among millennials. The millennial market is a very profitable one for financial advisors- Cerulli Associates estimates the investable investments of millennials to be $1.8 trillion. With millennials saving more, two-thirds of 18-30-year-olds would consider a financial advisor, according to Quilter Wealth Management. This has meant advisors have had to get comfortable with technology, digital content, and social media to maximize their exposure and market their financial advisory services to millennials.
Advisors Banking On Personal Touch
The stock market experienced a remarkable rally this week- rebounded almost 40 percent since March. This has been good news for financial advisors has it has meant that investor confidence is slowly being rebuilt, opening the door for them to seek investment and financial planning advice. In fact, a recent Wealth Report by Boston Consulting Group predicts that personal financial asset levels should return to 2019 levels as soon as next year. Other financial advisory firms are also taking the initiative and reaching out to their clients. With the help of video conferencing software and technology, advisors can speak to their clients and try to anticipate changes in income or family obligations such as job loss.
However, while all signs currently point to a post-pandemic recovery the financial advisory sector will still have to contend with the technological disruptions planned for the immediate future. The changing financial advisory landscape means advisors will need to adapt to the fintech trends and be able to demonstrate the unique value that the personal touch they bring to the table compared to Robo advisors.
Like many other industries, there is no doubt that the financial advisory sector has been hard hit by the effects of the pandemic. However, given the drastic shift overnight the industry continues to adapt well and capitalize on the opportunities presented, shifting its operational model to a more digital scale. Perhaps what is even more glaringly obvious is the acceleration of the industry towards a remote service- propelling both consumers and financial advisors well into the fintech arena.