The NZ financial advice sector is on the cusp of a generational change as market dynamics, technology and consumer trends advance the once-cottage industry onto a slick, modern business footing, according to a new Strategi paper.
Adapting a stack of global research for the local sector, the Strategi ‘Next gen advice: future-proofing your business for 2030’ report says advisory firms set to “thrive in 2030 will look very different from those operating today”.
While the market will still accommodate multiple advice business models in five years’ time, the study suggests the most successful firms are likely to be more scalable (and sellable) than old-school advisory practices with less reliance on a single ‘key person’ as well as the “ability to adapt quickly to industry shifts and seize opportunities”.
Furthermore, the best next-gen advice operations will “generate both a market salary and strong returns for owners”, the report says.
The paper, presented by Strategi founder, David Greenslade, at the Financial Advice NZ conference earlier this month, highlights technology – including artificial intelligence (AI) – as a central driver for advisory business upgrades over the next five years.
AI and other tech have the potential to automate many front- and back-office processes for financial advisers, freeing them up to better-serve clients, according to Strategi.
“By automating administrative tasks and leveraging AI, the business frees up valuable time for human interactions, ensuring clients receive the best advice and support possible,” the report says. “In fact, advisers and administrators will spend over 50% of their time engaging with clients rather than completing administrative duties, which could increase gross revenue per staff member by 30% or more.”
Digital-savvy consumers will also prove tougher to target online by 2023, Strategi says, requiring advisory firms to carefully target and calibrate online messaging.
In a world where financial advice providers are likely to split into two categories – specialist product-based (such as insurance or mortgages) and generalist, holistic firms – marketing strategies must be tailored to suit.
“Regardless of whether your advice business is a specialist or a generalist, a key marketing focus will be the shift towards proactive advice,” the paper says. “Instead of just reacting to client problems as they arise, technology will empower businesses to focus on proactive planning.
However, Strategi cautions advisers to take care in selecting outsourced service and technology partners as they delegate more operational duties to third-party firms.
“Select providers who can help elevate your reputation and make your business appear larger and more professional than your staff size might suggest,” the report says.
Next-gen financial advice success stories will depend, too, on improved governance and compliance processes.
And like hotels and restaurants and airlines and celebrities and TikTok personalities, the new-age financial adviser must ready for a deluge of online judgement.
“By 2030, user ratings and reviews will be more common, offering clients a transparent view of adviser performance,” the Strategi paper says. “This added transparency will help clients make informed decisions about the advisers they work with and encourage firms to continually elevate the standard of service they provide.”