Financial advisors are experts at helping clients plan for their futures. It turns out that many of these professionals often fall short when it comes to their own businesses.
That's according to a study from the Financial Planning Association, a professional membership organization, and SEI, a provider of wealth management services.
"For financial planners to maintain our competitive edge, we have to do for ourselves what we do for our clients," said Evelyn Zohlen, CFP and president of the association. "We must plan."
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There's one big way that financial advisors can prepare their practices for success in the next five to 10 years, according to the research.
To do that, they need to take a cue from sectors like the e-retail industry, which allows consumers to pick the shape, color, size and manufacturer they want with just the click of a button.
"The consumer is being trained to look for choice, to get personalization," John Anderson, managing director of practice management solutions at SEI. "I haven't seen our industry start to evolve in that direction yet."
Based on the results from an online survey that the groups conducted in August, which included 436 financial planners, they identified several ideas that advisors can use to bring their businesses up to date.
When it comes to who their ideal clients are, financial advisors have definite ideas.
Small-business owners came out on top, with 39%, followed by people in transition, 19%, and professionals, such as doctors or lawyers, at 11%.
One group that fell to the bottom of the list: millennials, the generation of adults ages 23 to 38 today.
"Millennials actually are a very large and growing demographic within our society and they have money," Zohlen said.
American households that are headed by millennials currently earn more than young adult households have in the past 50 years, according to the Pew Research Center's analysis of census data.
By not working with that generation, "financial planners are missing a growing and valuable source of new clients in the future," Zohlen said.
More than half of the survey respondents — 54% — said technology helps them form better connections with clients.
Yet those same respondents were hard pressed to come up with specific examples of how they are integrating those technologies into their practice.
New tools can help advisors and their staff automate tasks and free themselves up to spend more time with clients, Zohlen said. It can also help make their clients' lives more convenient.
Zohlen said she noticed a big change in her business when she started offering video conferencing in addition to in-person meetings.
As an advisor focusing on widows and divorcees, she never thought her clients would prefer video meetings instead of sitting in her office with tissues readily available.
Yet even clients just 15 miles away chose those appointments over in-person sit downs because of the convenience.
"I have been stunned as to how our clients have embraced it," Zohlen said. "They love it."
When it comes to the clients they work with, many advisors surveyed — 48% — said they work with any client who meets their minimum account size.
However, just dividing clients into groups by assets or revenue makes it harder to serve their individual needs. Take a 40-something tech entrepreneur and 60-something retired couple. They might both have $1 million in assets, but their needs will be drastically different, Anderson said.
Instead, financial advisors may want to group clients based on their needs and interests.
That way, they can better personalize their services and advice.
"It's better for the client," Anderson said. "They're getting specialized advice.
"It's better for the advisor," he added. "They're getting a longer term more successful practice."
Advisors who hear that advice often fear they have to give up certain clients, Anderson said. They don't, he said, but they do have to create a focus.