Downward advice fee pressures to impact client numbers

The financial adviser of the future will need to maintain around 1,000 client relationships, as both regulatory initiatives and robo-competitors put downward pressure on client revenue, argues a Silicon Valley-based investor.

In a recent Adviser Innovation article, Richard Arnold, an independent director of Financial Simplicity, said there is software disruption in almost every market, and consumers are becoming more conscious of their costs and seeking better deals from legacy providers.

“By my rough mathematics, we are headed towards a day where the average client wants to spend not $5,000 per year for financial advice, but $500,” he said.

“If I am right about this, then the average financial planner will need to maintain not 100 client relationships, but perhaps 1,000.”

At the same time, Mr Arnold said both regulatory pressures and markets demand are pushing advisers to be able to offer more customised portfolio solutions and to take greater care to ensure that those portfolios are properly monitored.

“At first glance, it would seem that advisers and the firms that employ them cannot possibly accommodate these simultaneous market demands for higher levels of personalisation, higher levels of diligence, lower levels of fees and much higher customer numbers per adviser, but with automation, all things are possible,” he said.

“What I believe is about to emerge to address these needs is the era of the ‘bionic adviser’, a human financial adviser who concentrates on building and maintaining personal relationships and structuring financial plans, armed with the bionics of an automated digital assistant who ensures that all elements of the plan are not only implemented but also properly monitored in real time.”

Mr Arnold added that because humans are by nature somewhat flawed, these new bionics will be able to overcome weaknesses and biases.

“We are already aware of digital assistants like Siri and Alexa in our consumer life, and now it is time for us to have digital assistants in our professional life as well,” he said.

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