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The Future of Advice: Business Models and Services For the Next Generations

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As technology changes the way investors work, communicate and invest, new opportunities for advisers are emerging. At InvestmentNews Research we wondered: How are clients' financial goals evolving with the times, and how can advisers best meet their needs? We surveyed nearly one thousand investors on their appetites for financial advice, as well as over 500 advisers in a companion survey, posing questions on how they believe their services and business models will change in the near- and long-term. Click through for some of the top-level findings of our research, in what is the first installment of our three-part "Future of Advice" series.

Published in: Data & Analytics
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The Future of Advice: Business Models and Services For the Next Generations

  1. 1. Advised investors | DIY investors 95% said they would still be working with their current financial adviser in 5 years • Typical investable assets: $500,000 • Average age: 54 • 54% male, 46% female • 70% married • 75.9% would prefer to access most or all of the financial services they need online through their financial adviser 73.5% said they would consider using a financial adviser in the future • Typical investable assets: $250K-$300K • Average age: 49 • 56% male, 44% female • 56% married • 72% said they would consider working with a financial adviser if they could deliver most or all of the financial services they need online through their financial adviser n = 409 n = 453
  2. 2. Need for holistic financial advice not waning How investors who employ a financial adviser believe their need for financial I will need more direct, personalized and professional advice Don’t expect needs to change I will not need any professional financial advice, 1.9% I will need less direct, personalized and professional advice advice will change over the next 5 years 32.0% 9.8% 54% n = 369 (advised investors) Investors want personal relationships
  3. 3. Characteristics investors value most in their adviser Ability to translate personal needs into a strategy valued highest 7.4% 6.3% 10.0% 30.0% 6.3% … by age 1.3% 30.0% 10.0% 5.1% 28.3% 7.4% 2.4% 32.7% 12.5% Shared values, integrity and trust Ability to translate my personal needs into Listening skills a strategy Responsiveness/communication skills Understanding of investment/financial Objectivity environment Years of experience 45+ Under 45 10.0% …by gender 2.1% 3.7% 7.8% 28.8% 8.7% 2.3% 29.2% 8.2% 4.2% 27.9% 5.8% 36.8% 16.8% Shared values, integrity and trust Ability to translate my personal needs into Listening skills a strategy Responsiveness/communication skills Understanding of investment/financial Objectivity environment Years of experience Female Male
  4. 4. Future demand for advisory services Investors: Which services will be most valuable to you over the next five years? n = 414 (advised investors) Advisers: Which services will present the largest growth opportunity over the next five years? 23.2% 22.2% 23.1% 15.0% 14.7% 22.0% 18.4% 12.6% 11.8% 9.1% 11.6% 8.6% 1.8% 8.6% 25.4% 5.9% 18.8% 39.2% 48.5% 10.4% 19.8% 38.9% Retirement income planning Investment management Estate planning Retirement saving Cash flow planning Financial plan development Brokerage Bill payment Investment consulting Income tax planning Insurance planning Investors Advisers n = 441
  5. 5. Investors prefer full-service advisory firms Investors: Which advisory firms do you prefer to work with? Advisers: How many principals does your firm have? 10.1% 29.6% 48.7% 43.6% n = 495 n = 372 (advised investors) 36.8% 19.6% A solo practitioner / 1 principal An ‘ensemble’ firm / 2-10 principals A full-service advisory firm / 11+ principals Investors Advisers
  6. 6. Methods of client communication evolving 84.1% 76.1% 78.0% 3.6% 3.8% 8.2% 8.8% 63.7% 69.1% 68.1% 8.4% 31.5% 17.9% 4.8% Telephone Email In-person meetings Text message Video conference Social media US Postal Service Advisers: What do you/will you rely on for direct, personal communication with clients? Currently In 5 years 79.5% 74.6% 61.1% 5.7% 0.8% 1.4% 13.2% 66.9% 78.8% 57.8% 10.5% 19.4% 2.7% 5.4% Telephone Email In-person meetings Text message Video conference Social media US Postal Service Investors: What will you rely on for direct, personal communication with your financial adviser in 5 years? Currently In 5 years n = 477 (advisers) n = 373 (advised investors)
  7. 7. Investors increasingly favor mobile devices • Investors own smartphones at a higher rate than any other consumer electronic device • Tablets owned at equal rate as desktop computers • 76% of investors under 45 access financial information on smartphone, vs. just 46% of those 45+ • 95% of investors under 45 own smartphone 22.1% 83.8% Investor device usage 63.2% 63.1% 83.2% 7.1% 54.8% 43.3% 57.5% 72.3% Cellphone (not a smartphone) Smartphone Tablet Desktop (PC) Laptop Use regularly Use to access financial account information Investor smartphone usage, by age 95.8% 94.4% 85.7% 78.2% 69.3% 82.5% 71.9% 56.4% 42.0% 35.8% Under 35 35-44 45-54 55-64 65+ Use smartphone on a regular basis Use smartphone to access financial account information n = 988 (all investors)
  8. 8. Female investors more active on social media Social networks used for professional purposes, by gender 4.7% 6.5% 14.2% 21.0% 18.1% 26.1% 34.3% 82.3% 12.2% 11.3% 18.6% 26.9% 41.2% 80.1% LinkedIn Facebook Twitter Google+ Blogs Pinterest Instagram Women Men
  9. 9. Younger investors look to greater variety of sources for investment & financial information Among respondents who have a financial adviser 47.0% n = 496 (advised investors) 16.0% 13.0% 50.0% 8.0% 18.0% 27.0% 41.4% 11.6% 9.6% 65.7% 1.3% 8.6% 36.9% Financial newspapers or new websites Personal finance websites Financial television news networks Personal financial adviser Social networks Friends, family Financial institutions (your bank, 401(k) provider, brokerage firm) Primary sources of investment and financial information, by age Under 45 45+
  10. 10. Investors over 45 more likely to pursue interactions via their adviser’s website 62.7% How do you use your adviser's website? 15.3% 13.6% 10.2% 39.0% 13.6% 23.7% 70.4% 8.8% 27.3% 45.8% 6.5% 15.3% 33.8% Read my adviser’s blog, newsletters or financial planning updates Update beneficiary information Maintain a ‘vault’ with important papers and reports Review all of my financial information in one place Send messages to my adviser Schedule meetings with my adviser Look up my account value 45+ Under 45
  11. 11. DIY investors aren’t flocking to robo-advisers How DIY investors invest their money, by age • Only 6% use automated investment service • Overwhelming majority have a retirement account, whether an IRA or employer-sponsored. • Online brokerage and bank savings accounts popular instruments. 11.9% 12.4% 9.6% 6.2% 33.1% 29.8% 41.6% 62.4% 5.9% 15.4% 41.6% 38.1% 46.5% 59.1% Through an employer sponsored retirement plan Through an individual retirement account Through an online brokerage In bank deposit instruments Through college savings plans Through a self-employed plan Through an automated investment service 45+ Under 45

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