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Friday, September 18, 2020

What Do FAs See In Their Future?

Reported by Lauren Corradi

Earlier this week, at the virtual Morningstar Investment Conference, featured a session that offers glimpses at where fundsters' FA allies see the industry heading next. The session, called "The Future of Advice," was led by Cathy Curtis (Disse), an independent fiduciary advisor for independent women at Curtis Financial Planning.


Catherine "Cathy" Rose Curtis
Curtis Financial Planning, LLC
The session began with speakers explaining their transition to a virtual setting during the pandemic and how it has affected their relationship with clients.

"As far as clients and their experience goes, they love Zoom, even my older clients who are absolutely thrilled when they figure it out," Curtis notes during the session. "... They donít have to travel, it's convenient, they can see my desktop just as well as if I was sharing documents, maybe sometimes even easier."

Is In-Person Over?

The seamless transition raises questions about whether or not the era of in-person meetings with clients is over.

"I think it is going to be important to have those in person meetings, I think a lot of bonding goes on," Don Philips, managing director at Morningstar. "Being in person is good for establishing the relationship, but I think these electronic meetings are going to become a huge part of us going forward because they are more convenient for the client and the advisor and it allows you to have more frequent, shorter meetings, which actually is healthy in developing a long term relationship."

"I definitely don't believe meeting with clients in person or having an office or anything like that is over," Alan Moore, CEO and co-founder of XY Planning Network, explains. "But we have seen an acceleration particularly from the larger firms to having a work from home infrastructure."

"As an industry, what I think we are going to be able to do is really embrace a more flexible workforce, a remote workforce, we may be able to hire people that don't live in our immediate area more readily than we were willing to do in the past," Moore continues. "... It really does allow us to be really specific in sort of our niche market, our ideal clients that we want to work with, whether they live near our office or not. I think it is really going to widen our ability to serve clients nationwide."

But does becoming increasingly specialized, in a specific niche market, raise any red flags?

"I think it's a huge positive," Philips explains. "Investing is about the art of matching the investment to the investor. And the more you know the investor, the more focused you are, the more value you can add there, the better you are going to be at that equation."

ESG Evolution

With the new digital age, products on offer with respect to ESG have changed over the years.

"It is so much easier to build an ESG portfolio that is well diversified now than it was years ago so it is entirely possible to even build your entire investment philosophy as an advisor around ESG," Curtis explains. "In fact, I am thinking about going that direction and having that be my core offering on investments, I am working on that right now."

"Again, I am not afraid of going narrower. I think for advisors, especially independent advisors, the narrower you go in a focus, the better, and your business will grow," Curtis continues.

Life Values

The pandemic has forced people to take a step back from their everyday to think about what it is they really value and want out of life; likewise, advisors are encouraged to have similar conversations with their clients.

"I got introduced very early on that it's not about money, it's not about saving everything you can to your 401(k), it's not about minimizing taxes," Moore explains. "It's about 'what are you trying to accomplish.' And that attitude ... and that same understanding of the value of financial planning is really around helping clients discover what it is they want out of life, because we are the only profession that asks our clients that question."

"You are going to see the chemical makeup of this business change because the people and the core values that they have that are coming into this profession and are really changing it into this helping profession that we know it to be," Moore continues.

Technology in the industry.

Can financial advising be robo-advised?

"A lot of the big firms have tried it and it hasn't worked very well," Curtis explains. "So much of a relationship with a client is the conversation, listening to what they are saying, listening to their goals. One of the reasons I chose women as my niche is because women like to talk and they are very open about themselves and they make it so easy for me to help them because they let me know what they are thinking and rarely is it about what type of investment return can you get me."

"You can do investments just about anywhere now and very cheaply, but you can't get that financial partnership with a human being who is really going to guide you, so financial planning is here to stay," Curtis continues.

But are there any areas where technology can replace humans?

"I think for the most part these new technologies, the roboadvice, it's going to be a robo-enhancement of the existing practices," Philips notes. "But there are huge forums of the public that the financial planning community is not reaching out to and can't reach because maybe it doesn't make economic sense."

"I think robo-advice can be helpful in widening the span of the audience that the financial planning market serves or the audience that gets financial planning, and today there are far more people who need investment help in financial planning than are receiving it, so I see this as a huge plus," Phillips continues.

Advice Fees

Firms have expressed their aims at bringing down costs of financial advice fees over the next few years, but will this actually catch on?

"I think there will be downward pressure, I think it is inevitable, but I don't think that it is going to play out the same what that it has with say the mutual fund industry where it is very easy to make comparisons and see the difference between the high and the low cost activities," Phillips explains. "With an advisor, you are talking about a personal relationship ... I think you get into much more personal situations that aren't just driven by financial analysis; they involve the heart, they involve relationships, they involve so many more things, so I think there will be downward pressure, but I don't think you are going to see these collapse in the financial planning service the way they have in the active management space."

Increasing Diversity

Financial advice clientele across the board lacks diversity, trending towards a predominantly white, wealthy community. The session explored how to serve a more diverse client base.

"Very few people of color contact me to work with them and it has been that way since I started," Moore notes. "I try to have imagery that would try to attract a more diverse clientele, I don't think that I am the answer. What I think is the answer is we need more people of color as advisors in our industry."

Moore explains at XY Planning Network they are working to increase diversity within their client base as well as on their team of advisors.

"One of our big things is promoting a business model that allows you to work with clients that don't yet have liquid asset wealth because in the end that is primarily held by white households in this country right now," Moore explains. "So by opening up a business model that allows clients to pay $100, $200 a month out of cash flow versus out of assets that someone may not have; it opens up an entire population to be able to work with getting financial advice, which we have seen has encouraged more black and hispanic advisors to get into this business."

"It is two-sided, and it's going to be a long battle and a long road to see more diversity in financial planning, but i think we are on that path," Moore notes. 

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