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Over the summer, the SEC made a proposal that advisors and brokers would have to address conflicts that emerge through investors interacting with artificial intelligence, an algorithm, or similar technology. At the Securities Industry and Financial Markets Association annual conference, there was some discussion over this proposal with SEC Chair Gary Gensler challenging the audience of financial professionals in his remarks.

Essentially, many believe that this is a way to expand Reg BI to make it apply to all sorts of interactions that happen between an advisor and client. SEC Chair Gary Gensler pushed back on this when he remarked, “We’re not trying to change Reg BI or change the fiduciary guidance.” He clarified that instead the SEC is looking to crack down on the use of predictive analytics to ‘micro target’ investors.

According to Gensler, there is an inherent conflict between current standards and this new technology if it’s built to help an advisor or broker increase their earnings as it would lead to unsuitable recommendations. He wants to see these algorithms modified so that the advisors’ interests are eliminated or neutralized. However, he didn’t have a strong opinion on how this should be achieved, citing that there are multiple paths to achieving this goal.  

Finsum: The SEC is proposing a new rule for use of AI and predictive data analysis. At a recent conference, SEC Chair Gary Gensler provided some more details about the proposal. 

One of the keys to unlock growth for your financial planning business is an effective marketing strategy. Marketing is important in every industry but even more so for financial advisors trying to differentiate themselves from the competition. You need to show what makes you unique and qualified to improve your clients financial situation.

The right marketing plan will help define your brand, raise your profile, and start generating leads. The first step is to understand your own strengths and weaknesses, identify your ideal client, figure out your unique value proposition, and research the marketing strategies of your competitors. It’s also helpful to think about what mediums or online platforms would be best suited to reach prospects.

Next, it’s time to set specific and actionable goals and evaluate whether your marketing plan is working or needs to be tweaked. Some metrics to consider are traffic to your website, social media followers, new clients, and an increase in sales. Once you have set your goals, it’s time to develop a content strategy.

There are many possible options, but it’s best to start with one that fits with your personality and that you personally enjoy. Once there is some traction, you can consider other forms of content. 

Finsum: Financial advisors need a solid marketing plan to effectively grow their businesses. Here are some tips on getting started. 

Blackrock is one of the leading providers of model portfolios. Currently, the asset manager is overweight megacap tech stocks. It sees strong earnings momentum and growth upside in addition to resilient balance sheets. These companies are more insulated from high rates as they aren’t reliant on bond markets for financing. 

The stock market rally in 2023 has been defined by a handful of stocks, powering the indexes higher. In contrast, smaller stocks and the broader market have struggled. Many analysts have cited this divergence as one reason to question the durability of recent stock market gains. 

YTD, the Nasdaq 100 is nearly 40% higher due to strong gains from companies like Nvidia, Meta, and Tesla. In contrast, the S&P 500 is up 14%. Currently, Blackrock’s model portfolios have about $100 billion tracking these stocks. This is particularly significant as the entire model portfolio asset base is estimated to be $4.2 billion. 

According to Tushar Yadava, a strategist with Blackrock’s Multi-Asset Strategies & Solutions group, Blackrock has been mostly overweight equities this year, although the firm did briefly go underweight in the spring of this year, following the regional banking crisis. Earlier in the year, it anticipated that the stock market rally would eventually broaden out, but this hasn’t happened yet.

Finsum: Blackrock is overweight megacap tech in its model portfolios as it favors companies with earnings momentum and strong balance sheets. 

New financial advisors face some daunting challenges such as learning the industry, getting their licenses, and building a book of business. Last year, headcount in the industry only grew by 2,579 advisors with a failure rate of more than 72% for rookie advisors. 

This highlights the succession crisis that is facing the industry. Over the next decade, it’s estimated that 37% of all advisors, representing 39% of total assets, will be retiring. And among this group, 26% have no succession plan in place. While this is a major challenge for the industry, it’s an opportunity for savvy advisors.

For firms, some strategies to improve rookie advisor retention is through a structured training program. Firms will have to invest in developing and retaining their own in-house talent rather than the previous growth model of recruiting advisors from competitors. 

Another constraint for firms looking to boost their recruitment efforts is that currently most new advisor recruiting is through word-of-mouth referrals. However, these types of informal methods will certainly overlook many qualified candidates outside of these networks. Therefore, firms must be more proactive in educating young people about this potential career path. 

Finsum: The financial advisor industry is facing a challenge as many senior advisors are nearing retirement, while recruitment of new advisors has been lacking.

The most effective form of prospecting is asking clients for referrals, yet 88% of financial advisors fail to do so. The simple reason is that most advisors feel too uncomfortable and don’t want to affect their existing relationship with clients. 

However, this fear must be overcome if an advisor is serious about growth. According to Brett Van Bortel, the director of consulting services at Invesco Global Consulting, the reluctance is counterintuitive as more than 85% of new business comes from referrals from existing clients. 

Van Bortel recommends advisors frame their request as an opportunity for the clients to help their friends and family with high-quality financial advice rather than as a favor for the advisor. The same principle applies to establishing fruitful relationships with centers of influence who often refer high net worth clients with complex issues. 

Centers of influence include other professionals like lawyers and CPAs. According to DeVoe & Co., 17% of new clients and 23% of new assets come from these referrals. They are looking for expertise and help in solving a problem. It can often take a long time to develop these relationships and build enough trust, but these efforts can yield steady long-term returns.

Finsum: A key source of growth for financial advisors is client referrals. Yet, many advisors are reluctant to ask their clients for referrals.