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FAs Shifting to a More Client-centric Model

According to a new report, the fiduciary movement, digital advice and changing consumer demands are among the components driving the shift toward a client-centric model among financial advisers, where the client wants a more collaborative, enhanced level of personalized advice, compared to a world where the adviser simply determines products clients would buy.

The SEI Advisor Network’s “The Next Wave of Advice Management” report explores how FAs can make their client relationships more dynamic and have deeper engagement through co-planning and the implementation of repeatable processes in light of the changing expectations.

The report’s findings are partially based on a survey conducted in November 2017, with responses from 542 FAs, including respondents from RIAs or hybrid firms (46%) and broker-dealer-affiliated advisers (45%). There is no indication that any 401(k) plan advisors were included in the survey.

Among other things, it recommends that advisers utilize a customized planning approach that is facilitated through technology and best fits their clients’ distinct goals or cash-flow needs. This includes various planning methods, such as project-based, modular, holistic and segmented planning.

“In this era of intense competition, fee compression and increased regulatory scrutiny, advisors must become more efficient and do more for their clients, with less,” explains John Anderson, Managing Director and Head of Practice Management Solutions at SEI Advisor Network. “Technologies are pivotal, but advisers need to balance ‘high-tech’ with ‘high-touch’ to add capacity and value. While automating elements of the co-planning process is key, the human component remains central to the advice-management experience.”

The survey also found that only 41% of FAs view financial planning as their core value proposition. When looking at the obstacles they currently face, 24% of advisers responded that their biggest challenge is explaining the value of planning to prospects and clients. When it comes to executing the financial planning process, 26% said finding the right technology to effectively co-plan with their clients is most difficult. Other respondents indicated that finding the right fee model to charge for planning and getting clients to open up about their entire financial picture was a challenge.

But given the new landscape in the fiduciary era, SEI emphasizes that advisers will have to “delve deeper to understand more about a client’s total financial picture before making recommendations and be able to document the rationale for those choices.”

Advice Management

The report further suggests that advisers focus on three business elements equally: people (clients and staff), process and technology. To illustrate the value of this strategy, SEI and ActiFi tracked the performance of 46 financial advisory firms from Sept. 2015 to Dec. 2017 through before- and after-surveys to assess how systematizing routine task execution ultimately affected their businesses.

The overall results show that advisers who implemented “automated repeatable processes” saw significant benefits to their overall businesses, allowing them to co-plan and further engage with their clients.

Before the program, 70% of advisers agreed that they did not have sufficient time for client-related activities, such as financial planning, prospecting and client meetings, but after implementing process automation, the number of advisers that still felt this way decreased by 41%. Advisers also reportedly saw a 66% increase in the number of clients receiving financial planning services, as a result of “regained efficiency.”