It’s time to reinvent your financial advisory business

Publications 5 minutes to read

Adam Reynolds

CEO Asia Pacific, Saxo Capital Markets

Summary:  Financial advisors and wealth managers must evaluate their offerings and redefine how they provide financial advice. Digitisation is the way forward, offering opportunities to scale through greater process automation, while also delivering the greater flexibility, customisation and optionality needed to meet evolving client demand.


Being a financial advisor or private wealth manager today is challenging. A Forbes article1 noted that the top three challenges for financial advisors are firstly, maintaining your own operations, secondly, finding a unique value proposition and thirdly, increasing revenue and profits. 

Add to these challenges the pressures from new entrants, regulatory and compliance requirements and an increasing demand from wealth management clients for more personalised services and quality advice, there is a real – and ever more urgent – need in the market for financial advisors to reinvent themselves and their business model to stay relevant and future-proof.

Fighting an uphill battle 
Financial advisors and private wealth managers today face an increasingly challenging external operating environment. A combination of margin pressure, rising costs and process inefficiency is challenging the business models of financial advisors and private wealth managers.

Many advisors are distracted from core investing and advisory work by the ongoing increase in largely manual compliance and onboarding tasks.

At the same time, advisors are not always getting the support they need from traditional supplier relationships as they try to meet evolving client needs. Presently, they often partner with multiple institutions to supply a comprehensive service, such as execution brokers, prime brokers, custodians and insurers, which can add substantially to cost, while potentially compromising consistent service quality. 

Institutional partnerships can lead to conflicts of interest, such as when advisors rely on services from firms that have competing offerings in certain markets. Service providers to the private wealth management industry are exiting the business or reducing service levels to smaller advisors, failing to support efforts to respond to end-client needs for greater transparency and control.

Business scalability is severely limited by manual processes across many areas, notably achieving the client consent required for portfolio rebalancing and strategy shifts. Margin pressures felt across the entire asset management industry are hitting financial advisors particularly hard, notably regulatory changes to commissions and fees, best interest requirements and the rise of robo-advice platforms. With many advisors struggling to scale up from a small base of clients, it may be no surprise if we see more practitioners looking to exit the business or consolidate.

Yet, research from EY2 also points to an expected rise in demand for independent advisors, which means that to be ready for the future, the time to find the best and fastest way to scale is now.

There are ways to stand out from the crowd
Financial advisors and wealth managers must therefore take a step back to evaluate their offerings and redefine how they provide financial advice to better meet client needs and expectations. 

A study3 done in Singapore on millennial investing habits found that 71 per cent of respondents want to start investing, but only 38 per cent consider themselves knowledgeable about investing. For financial advisors and wealth managers who want to grow their client base, there is a huge opportunity for client acquisition if only they could spend more time offering customised advice and designing the right portfolios to help close the gaps in knowledge and access. 

To break free of the locks and chains of traditional models, what they really need are low-cost, seamless, one-stop-shop solutions that can help them differentiate themselves from competitors, offer them an effortless way to scale and gain more clients, and continue to thrive in the face of regulatory and compliance requirements. 

Digitisation is the way forward, offering opportunities to scale through greater process automation, while also delivering the greater flexibility, customisation and optionality needed to meet evolving client demand. 

The fastest way is to tap into partnerships and fintech solutions to expedite the integration process with your business while not costing an arm and a leg. For firms at the lower end of the market that are unable to invest in digital transformation programmes on their own, it is imperative that they work with the best partners out there who can accelerate their digitisation journey. 

To truly future-proof your financial advisory business, here are a few critical considerations when selecting a one-stop-shop solution:

  • Global capital market access and multi-asset offerings: Make sure the solution you choose allows access to global capital markets through multi-asset execution and custody, so that you can trade and manage your clients’ portfolios from a single margin account, and execute trades across multiple asset classes, complemented by integrated custody, clearing and post-trade services.
  • Strong digitised wealth management offerings: Ensure business scalability through efficient portfolio management and integrated digital advisory experiences. Automation of onboarding and consent processes will free up advisors to focus on investment performance where they can offer customised and integrated digital client experiences, including flexible visualisation and analytics tools.
  • Best practice compliance capabilities: Delivered across multiple jurisdictions, this helps reduce complexity and get increased security by monitoring risks effectively. 
  • Competitive pricing: Reduce long-term total cost of ownership by keeping pace with technological innovations and lowering ongoing capital expenditure with competitive pricing

To stay ahead of the game, it’s still not too late to seek out partnerships with technology-led service providers who can provide the long-term support and capabilities needed to complete in a digitised wealth management market.

 

Sources: 1 Forbes
                 EY 
                 Business Insider

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