Societies cannot remain static and hope to survive. Change is intimately woven with life. Ways to barter and pay for items have long been a part of life, too, and today that particular tool is money.
In order to make their money work as hard as possible so that they do not have to, many people trust an investment advisor to help them use their funds wisely and even to act on their behalf to make certain transactions. However, the financial world is always changing, along with the rest of society. Here are five trends that challenge today’s investment advisors.
Complicated Financial Terrain
Things are not as simple as they used to be, not just in moments of nostalgic longing but in very real ways. In past decades, a worker’s employer managed the pension plan, and the worker felt confident that her future needs would be met by the pension coupled with government payments.
Today, however, workers generally have to fund their own pensions through corporate arrangements. In addition to workers’ own worries, they may have spouses’ retirements to consider, children’s college funds, and potentially caring for elder parents. Should they take all of this to a financial or investment advisor for help, that professional has the pressure to offer initially sound advice in order for the futures of many individuals to be better.
Technology offers many positives for modern living, including for investment experts, but it also offers challenges. It can provide financial industry professionals with huge amounts of data and analytical tools as well as efficient, real-time communication applications. Yet technology is impacting the entire situation of modern advisors by making it more complex.
With the exploding opportunities offered by online investing services, rivalry in the advisory field is fierce.
Shortage of New Advisors
Even with investment opportunities increasing exponentially, there are simply not enough advisors to meet the demand. Many older, more experienced financial experts are starting to retire. One does not become a financial expert with just a few hours of research. Becoming a top financial professional takes years of training and certification, as well as hands-on experience. There are simply not enough new advisors going into the industry to fill the void being left by the older investment experts who are retiring.
Pressure From Many Sides
When markets drops, potentially impacting the investors’ nest eggs, they can become extremely nervous and even upset. Modern financial professionals not only have to offer sound industry advice but also possess solid interpersonal abilities and even counseling skills. They must be able to soothe frazzled nerves and effectively manage their clients’ mental states.
Advisors get even more pressure put upon their shoulders because clients may seek to avoid risks in order to sleep at night. Yet these same clients still want high returns on their investments. Therefore, people choosing a financial advisor today are demanding they squeeze high returns from low-risk assets.
Demand for Services with Lower Fees
The modern financial industry is moving from a transactional-based fee structure to one that favours lower margins and lower earnings for investment professionals. In the past, for example, stock brokers were compensated for each client trade, a system that earned them large sums. Now, an annual fee is becoming more common, resulting in lower earnings for advisors.
In addition, people are favouring simpler approaches to investing. Packages that include exchange-traded funds (ETFs) and index mutual funds are becoming popular amongst investors. Such systems allow advisors to serve a large client base. However, they also mean that investment advisors do not earn the large fees of past years.
The Bottom Line
Nothing is static—life changes. The investment industry is not immune to modern trends and adaptations. As today’s workers are now faced with having to put together their future retirement funds on their own, they look to investment experts who, in turn, are navigating their own evolving industry. However, expert firms with deep industry knowledge and instinct born of experience can ride the waves successfully.