As if there wasn’t enough conflicting information already, after nearly six years of solid growth, advisors are reporting a feeling of increased anxiety about a potential market slowdown in the months ahead, according to an SEI survey.
The survey, conducted at SEI’s recent National Strategic Advisor Conference, revealed that more than half (53 percent) of advisors anticipate that the Federal Reserve will increase rates before the end of 2015.
Fifty percent of advisors surveyed believe an interest rate hike will lead to a market downturn, and a large majority (78 percent) anticipate minimal growth of between 0 and 10 percent for the Dow Jones Industrial Average this year. Furthermore, advisors and clients seem to have an equally negative outlook in 2015, with 43 percent of advisors sharing that the biggest change they have seen in their clients this year compared to 2014 is that they are generally more pessimistic about the markets.
“While the seemingly imminent Fed interest rate hike is understandably souring the mood of advisors, it is extremely important for them to remember that now is the time to discuss and guide clients to focus on their individual financial goals despite increased anxiety,” Steve Onofrio, Senior Vice President, Sales and Service, SEI Advisor Network, said in a statement. “There may be a need for minor adjustments to the strategy based on market fluctuations, but if a goals-based approach is implemented, investors should feel slightly more comfortable that their financial goal, be it college, retirement planning, or wealth accumulation, will not change drastically.”
In addition to questions about the overall state of the market, advisors also addressed the state of their own firms. Generally, advisors recognized a need to optimize processes and systems to spur growth. When asked if their firm was optimized for growth, less than a quarter (23 percent) said they were “absolutely” optimized. Meanwhile, 43 percent said they were “sort of” optimized for growth, 20 percent said they were in the planning stages to improve efficiency, and 14 percent said they were not optimized for growth and were instead focused on top line sales.
On the topic of systematizing processes, slightly more than a third (35 percent) of advisors said their business processes were highly detailed or automated with technology. The remaining respondents did not have formalized processes in place, with 25 percent saying they have a high level outline for some processes, 29 percent saying processes were mostly in people’s heads, and 10 percent saying they do not have formal processes at all.
The survey also revealed that technology is likely to play a role in how advisors improve their processes and prepare for growth. When asked to describe the most important role technology plays as it relates to their business, 57 percent of advisors said they want technology to create efficiencies that allow them to be more profitable from a business standpoint.
When asked about the future of their business, these advisors pointed to client acquisition and relationship management as both a challenge and an opportunity for growth. Regarding their biggest growth-related challenge, nearly two-thirds (64 percent) said their challenges were related to clients, as 34 percent said finding new clients was their biggest challenge and 30 percent said finding time to balance client relationships with administrative tasks was their biggest challenge. Meanwhile, more than half of advisors (53 percent) saw more investors looking for advice as their biggest opportunity in the next three to five years.
In terms of the biggest impact on financial advice over the next five years, half (52 percent) said a shift toward more holistic “goals-based” planning. About a quarter (27 percent) cited changing client expectations, 13 percent said the adoption of a fiduciary standard, and only 8 percent thought the increase in “Robo-advisors” would have the biggest impact.
“In a fast-paced environment where clients want high-touch service, technology automation can provide advisors with more time, allowing them to better serve their clients,” said Onofrio. “Technology is also a vehicle to help increase engagement and collaboration between clients and advisors, while enabling advisors to run their business more effectively.”
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
