With demand for financial advisors rising and supply falling, there is no better time to get into the advisory business. Here’s what you should know before jumping in.
There is probably no better time than now to become a financial advisor.
While the demand for financial planning and wealth management is rising, there is an impending shortage of advisors. McKinsey and Co., a global consulting company, expects a shortage of 100,000 advisors by 2034.
If you are an aspiring advisor, this means you will face less competition when searching for a job or setting up your practice. At a time when people are worrying about losing their jobs, you can focus on being better at it.
However, given that the financial advisory business is changing, there are certain things you must know before starting your career. Consider these insights from an experienced advisor:
1. Soft Skills Are Essential
The financial advisory business thrives on relationships. This is because trust is the currency the business trades on.
Trustworthiness is the first factor people consider when choosing a financial advisor, according to a YouGov survey.
Most times, people trust those they like and believe have their best interests at heart.
Most clients will choose a financial advisor they have a personal connection with. This connection often comes when they believe the advisor listens, empathizes and cares.
However, clients do not want advisors who will always affirm them and validate their feelings, even when they need to tell them hard truths. You must develop the emotional intelligence needed to strike the necessary balance.
2. Hard Skills Are Not Dispensable
Yet, hard skills remain vital.
The most emotionally intelligent person who does not understand how to design an investment portfolio will be of no benefit to financial advisory clients. In the end, clients want to achieve their financial goals.
Thus, you should not see the emphasis on soft skills as a cop-out for poorly developed technical skills.
Ensure that you brush up your knowledge of financial planning and analysis, investment management, tax planning, estate planning, risk management, financial regulations and any relevant technology stack, among other skills.
3. Personalization Is the Name of the Game
As digitization efforts expand across the globe, the focus on personalized offerings has been palpable across industries. The financial advisory industry is not an exception.
“88% of planners plan to learn more about their clients’ values and beliefs to better incorporate these into financial plans, which demonstrates a deep commitment to tailoring financial plans to what’s most important to clients,” according to a 2024 survey by the Financial Planning Association.
The world where you can create a generic plan for multiple clients is long gone. Increasingly, investors (especially Gen Z and millennials) want to invest in a way that aligns with their beliefs and values.
Good advisors will provide a personalized plan that aligns with the client’s financial goals, beliefs, values, risk capacity, risk tolerance and time horizon.
Personalized advice aims to help investors trade financial anxiety for wellness.
4. Be a Fiduciary
A fiduciary advisor has a duty of care and loyalty. The former requires that you make informed decisions, while the latter demands that you eschew any conflict of interest.
Financial planning clients are prioritizing advisors who will act in their best interest rather than seeking their financial gains.
This implies that fee-only advisors will be in greater demand than those who receive commissions from the products they recommend.
An added advantage is that you gain the trust of your clients. As I said above, people trust those they believe are working in their best interest.
You may think that the fee-only model leaves money on the table, but in the long run, it is the way to sustain a long-term relationship built on trust.
5. A Long-Term Relationship Is the Goal
That leads me to my next point: You should prioritize long-term relationships with clients.
“A significant percentage of planners, particularly 73% in specialized firms, agree that they will need to adapt their business model to cater to more clients who see financial planners as collaborative partners,” according to the FPA survey.
In other words, clients are looking for advisors they can trust over the long term. Therefore, you must cultivate a long-term mindset, one that prioritizes ongoing relationships.
This will mean getting to know your clients beyond their finances. However, it does not mean changing the relationship from a professional to a personal one. You will always need the independence to tell your clients hard truths. This can be threatened if the relationship gets too personal.
6. Commit to Lifetime Learning
CFP certification is the standard for excellence in financial planning.
To become a CFP, you need to meet rigorous education, examination, experience and ethics requirements set by the Certified Financial Planner Board of Standards (CFP Board). If you hold yourself out as a specialist or subject matter expert, consider pursuing additional designations and certifications.
7. Sharpen Your Business Skills
If you are setting up your financial advisory business rather than working for an existing one, you need to sharpen your skills in business development and marketing.
Your marketing efforts should incorporate older strategies (attending events, word-of-mouth referrals, outdoor advertising, etc.) and newer ones (content marketing, social media marketing, influencer marketing, etc.)
You must understand your business’s core competencies or unique proposition, anticipate potential customers’ objections, and meet those objections. Also, the business side of things requires having fee structures that reflect clients’ needs.
“Commission-based structures remain prevalent, but advisory services increasingly explore fee-based, subscription-based or hybrid pricing structures,” according to the World Economic Forum. “Younger generations prefer short-term, low-commitment pricing models with the flexibility to start and end services as needed.”
In essence, your pricing structures should be diverse enough to cater to all kinds of clients. Such flexibility is a unique advantage in today’s market.
8. Clients Expect You to Take Initiative
Advisors in today’s market must keep the communication channels with clients open.
When developments in the global or national economy have an impact on their portfolios, you should talk to them about it. If changing regulations, laws and politics cause them to panic, communicate with them.
People depend on social media for information, and these media platforms thrive on sensationalism. If you don’t offer a balanced perspective, some of your clients will act based on social media hype.
In other words, you should not always wait until your clients ask questions.
9. Use Technology to Your Advantage
You should see technology as a tool that will make you more effective and efficient, rather than a replacement.
There are two main uses of technology for financial advisors.
The first is improving your operations so you can reduce operational costs and save time. Digitizing physical processes and automating repetitive tasks are essential here.
Secondly, technology can improve the services offered to clients. You can use artificial intelligence and machine learning to better understand clients’ data and deliver personalized strategies. You can also use these technologies to optimize your investment decisions.
10. You Can Positively Impact Others
For many of us in the advisory business, there is no more satisfying feeling than seeing people’s lives change. Money may not equal happiness, but it can provide people with financial security and peace of mind.
If the desire to make an impact is your motivating factor, you won’t be disappointed. The advisory business can be daunting, but the joy of helping people achieve their financial goals can compensate for the stress and uncertainty.
