By the year 2025, a majority of financial advisors expect to spend most of their time cultivating clients via in-person meetings no matter how deep the inroads made by Internet algorithms, according to a new survey by SEI.
The survey of 175 financial advisors found that 58 percent expect to spend most of their 2025 time in in-person meetings.
Another 32 percent of advisors said they expect to spend most of their time cultivating clients through video conferencing. Another 10 percent expect to build relationships through email, social media and events, the survey found.
The findings reinforce what advisors have maintained for years: that their business is based on relationships, and those relationships are built through in-person interactions between advisor and client.
“While certain aspects of portfolio management can be automated for smaller portfolios, financial planning and the decisions related to it are for more complicated today for larger portfolios, and will continue to be so 10 years down the road,” said Wayne Withrow, executive vice president of SEI and head of the SEI Advisor Network.
The SEI Advisor Network offers wealth management services solutions for advisors. The survey of what advisors believe their industry will look like in 2025 was conducted during two SEI conferences held in the fall.
Future complexity regarding tax rates, tax liabilities and estate tax planning favor the in-person relationships that a majority of advisors say will be the best way to cultivate clients in 10 years.
With an estimated $30 trillion passing from baby boomers to Generation X to millennials over the next 30 years, advisors seem confident they will have the upper hand on Internet-based algorithms when it comes to minimizing the tax liabilities connected to wealth transfer.
SEI’s survey, for example, found that 92 percent of respondents said their approach to financial planning and their client relationships would constitute their largest differentiators in the market in 10 years.
Only 5 percent said investment approaches would amount to their biggest differentiator, while 2 percent said technology and 1 percent said the size of the advisory practice would constitute the biggest differentiator, the survey found.
Indeed, cultivating relationships with a client’s children will soon become as important as maintaining the relationship with the client over the next decade.
Research unrelated to the SEI survey found that heirs to fortunes passed down from parents are likely to fire the advisor: 66 percent of children fire their parents’ financial advisor after the children receive an inheritance, according to data compiled by InvestmentNews.
The InvestmentNews survey of 544 advisors, conducted in April, also found that 54 percent of advisors meeting with their client’s children less than once a year. The point being that advisors who don’t cultivate relationships with the children of clients may want to rethink their approach.
Many children who stand to inherit fortunes have embraced the Internet not only as an investing medium, which allows for a more self-directed approach to investing, but as a personal relationship medium as well — online dating, for example.
Stories abound of children ordering their inheritance transferred from the responsibility of long-time flesh-and-blood advisors into self-directed accounts at big brokerages like Charles Schwab & Co., or into mutual funds.
SEI’s survey found that 48 percent of respondents said Internet-based investing, also known as “roboadvisors,” will have an impact on the industry in a positive way. Meanwhile, 21 percent said roboadvice would affect the industry in a negative way.
More than half of the advisors surveyed said they expect to offer some kind of roboadvice to clients by 2025, the SEI survey found.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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