A new survey of advisors finds that more than a quarter are planning a dramatic change within the next three years, and nearly 4 out of 10 will shed smaller clients due to new regulations.
The survey of 300 U.S. financial advisors by Natixis Global Asset Management found that 27% of financial advisors are planning a dramatic change within three years by selling their book of business, merging with another firm, leaving the financial industry altogether, or retiring. Moreover, 37% say they will disengage with smaller clients due to new regulations. Little wonder that nearly 9 in 10 (86%) say that meeting strict regulatory and disclosure requirements are some of the biggest challenges to the growth of their business.
Robo Realities
Along with those challenges, for the most part, advisors see the automation of professional advice for certain segments as a positive development. The survey found that:
- 84% of advisors believe the automated advisory model provides greater access for low balance investors; and
- 51% believe a front-end automated advice platform could be a way to improve the efficiency of their own business.
It also found that 86% are not concerned that automated advice will make the traditional, high-touch advisory model obsolete. For instance, they do not think robo-advisors can deliver the tactical asset allocation needed, particularly in down markets, according to the report.
Passive Push
The survey found that advisors are under cost and regulatory pressure to yield to the demand for lower-cost passive investments, but 75% worry investors don’t know about or appreciate the associated risks. A significant majority feels strongly that volatility lends itself to active management, but the survey’s authors say it’s harder for advisors to satisfy clients, comply with new regulations, and manage a thriving practice on their own, compelling many to reinvent themselves as others exit entirely.
Natixis also found that managing investors’ performance expectations is a top priority for advisors, especially given that failing to do so is the No. 1 reason investors have said they leave their advisors.
Investors expect an average annual return of 8.5% above inflation, fully 44% higher than advisors say is realistic in the current market. The vast majority of advisors surveyed (85%) their success depends on gaining a more accurate picture of their clients’ risk tolerance.
Natixis’ 2016 financial advisor research was conducted in July 2016 with 300 financial advisors in the United States.
