Displaying items by tag: clients

2022 was a dismal year for rookie financial advisors as there was a 72% failure rate. In total, the number of new financial advisors grew by 2,579 which was barely more than the number of advisors who retired. 

Overall, there are 288,555 financial advisors in the US. A pressing concern is that the advisor workforce is rapidly aging. According to a recent report from Cerulli, 37% of advisors plan to retire over the next decade. This amounts to 106,264 advisors who will be exiting the industry.

At current growth rates, there is little chance of this shortfall being made up unless there is some radical change in training programs or recruitment efforts. Currently, 64% of new advisors are recruited through referrals. 

Financial services companies will have to broaden their horizons if they want to educate young people about this career path especially as the role has shifted significantly over the last couple of decades from focusing on stock-picking and investment management to goals-based planning.

For younger advisors, it constitutes a significant opportunity to gather clients and assets. For firms, it will likely be a major challenge and likely continue fueling the recruiting frenzy.

Finsum: It’s estimated that nearly 40% of financial advisors will be exiting the industry over the next decade. This will create major challenges and opportunities for players in the industry.

Social media can be a goldmine for financial advisors with a plan and system to consistently create content. However, it can also be a curse for advisors who don’t represent their practices properly or spend time and resources ineffectually.

In theory, social media gives an advisor the ability to reach thousands of users on various platforms, many of whom may be in the market for a financial advisor. It can also help you target prospects in your niche and customize content accordingly. For SmartAsset, Rebecca Lake CEFP shares some additional tips on effective content creation for social media.

The first goal is to create brand awareness through a presence on social media. This is the first step in the journey from gaining a social media follower, converting them to a prospect, and eventually a client. The next step is to use interactions on social media to build a following and deepen connections with existing clients and prospects. One strategy to do so is to run polls and ask questions of your followers to gain a deeper understanding of their perspective on various matters and spark thought and conversation.

Another important step is to do some research in order to understand where your ideal client spends time on social media. For instance, an advisor targeting younger clients may have better results on Tiktok or Instagram whereas a client targeting older clients would have more success on Facebook. 

Finsum: Social media is increasingly how advisors connect and communicate with clients and prospects. Here are some tips to increase your odds of success. 

For Vettafi’s ETFTrends, James Comtois discusses some of the key advantages of direct indexing for investors, and why the category is expected to continue growing at a healthy clip over the next decade. In essence, it’s become increasingly evident over the past decade that investing passively and consistently in low-cost, diversified funds is the key to outperformance. Currently, there is $260 billion in assets managed via direct indexing with this figure expected to exceed $500 billion over the next decade. 

At the same time, society continues to evolve in a manner that serves consumers with content, products, and services that are customized to their taste. Concurrently, there has been technological innovation in the financial space that has resulted in drastic declines in the cost of stock trading and money management. 

Direct indexing is at the intersection of all these trends. It captures the best parts of passive index investing as it recreates an index in an investors’ account with some tweaks if necessary to reflect one’s personal values and beliefs or unique financial situation. It utilizes technological innovations to scan for tax loss harvesting opportunities which then can be used to lower an investors’ tax bill. Due to this factor, direct indexing strategies outperform especially in more volatile environments. 

Finsum: Direct indexing is one of the fastest growing areas in wealth management. Here are some factors behind its increasing popularity. 

The landscape for financial advisors has shifted rapidly over the last decades. And, these shifts are only accelerating in terms of frequency and impact. Thus, advisors also need to update their strategy and approach to thrive in this new environment.

A major change is that advisors have to work harder to get and keep clients, especially given that many other money managers are likely competing for clients' resources, time, and attention as well. 

For Financial Planning, John Guthery discusses why advisors should start embracing model portfolios to align their business with this new environment. Increasingly, the most value that an advisor brings is through quality time spent communicating with their clients to understand their needs and plan appropriately. This is true for both parties. 

Too many advisors are spending too much time managing portfolios and researching investment ideas, when they could instead be focused on tasks that will actually grow their business. Most long-term research shows that advisors fail to beat the market over long periods of time.

With model portfolios, this function is effectively outsourced so that advisors can spend more time on the tasks that actually move the needle in terms of building and operating a thriving practice. 

Finsum: Financial advisors tend to feel like they are not spending enough time with clients. Model portfolios are one solution as it frees up time for advisors.

For Vettafi’s ETFTrends, James Comtois shares his thoughts on the major differentiator for direct indexing vs the traditional strategy of investing in index funds. Over the last couple of decades, it’s become accepted wisdom that investing in passive funds is the best path to retirement given their diversification, history of long-term gains, and low costs and fees. 

However, there is one drawback to this strategy. Investors are unable to capitalize on tax losses to offset gains to lower their year-end tax bill. Direct indexing addresses this weakness while still retaining the major benefits of passive index investing. In addition, it also enables investors to customize their holdings to reflect their personal values and beliefs.

Still, the key advantage for direct indexing is the boost in returns due to tax-loss harvesting. This can result in additional performance between 1 and 2% and is more potent in years with greater volatility. It can be particularly beneficial for investors who have gains in other parts of their portfolio. 

With direct indexing, the portfolio is scanned regularly to sell losing positions. These are replaced with stocks that have similar factor scores to continue tracking the benchmark. 

Finsum: Direct indexing has several benefits for investors but its key advantage is that it can help them reduce their tax bills and boost performance in more volatile years.