The role of the modern financial advisor as we know it is evolving–and for the better.

McKinsey & Company analysts suggest modern financial advisors will become “more like integrated life/wealth coaches who advise clients on investments, banking, healthcare, protection, taxes, estate, and financial wellness needs more broadly.”

No longer limited to investment-only advice, the modern advisor offers a more comprehensive understanding of clients’ financial lives and even well beyond the “financial” relationship.

In fact, many “modern” financial advisors are already there and are already winning over the hearts and minds of their clients by doing so. And frankly, those who are not committed to this or those who are not at the very least rethinking their approach to advice, are putting themselves at a disadvantage. 

The $84.4 trillion Great Wealth Transfer–or better yet, Great Relationship Transfer–is here and is certainly a driving force accelerating the financial services industry into a new era of relationships and client service. 

What we’re seeing play out in real-time certainly feels like the approach to “advice” we expected (and many would hope) would come one day, where the advisor’s role extends far beyond traditional investment advice: paving the road to success for advisors who embrace a truly comprehensive and embedded approach to multi-generational wealth, health, and client life management. 

The Family-Office Service Model 

One trend shaping the future of financial advice is the adoption of the family-office service model by modern firms. This model, while historically reserved for the ultra-wealthy, is now being democratized and offered to a broader audience. In the past, the family office service model was used to provide a ‘full suite’ of financial planning services to ultra-high net worth clients. For example, the family office advisor might offer tax planning, charitable distributions, estate planning, and/or succession planning within the network of experts at the firm (such as lawyers, accountants, financial planners, etc.).

Modern financial advisory firms, including Registered Investment Advisors (RIAs), are increasingly adopting a white-gloved family office service model for several compelling reasons. This approach is not only redefining the value proposition they offer but also significantly enhancing the experience and outcomes for both the firm and its clients. Here’s an overview of the key drivers and benefits:\

For the Firms and Advisors:

• Differentiation in a Competitive Market: Offering a family office service model allows firms to differentiate themselves by providing a high-touch, bespoke service that appeals to high-net-worth individuals and families.
• Increased Client Retention: By addressing the comprehensive needs of clients, advisors can foster deeper relationships, enhancing client loyalty and retention.
• Opportunity for Growth: This model opens avenues for targeting a more affluent clientele, potentially increasing the assets under management and enabling the firm to grow its market share.
• Enhanced Advisor Engagement: Advisors often find greater job satisfaction in delivering comprehensive services that have a meaningful impact on clients’ lives, leading to higher engagement and retention of talent within the firm.

For the Clients:

• Comprehensive Wealth Management: Clients receive comprehensive management of their wealth, including investment management, estate planning, tax strategies, and more, ensuring all aspects of their financial life are cohesively managed.
• Customized and Personalized Service: The white-gloved approach means services are tailored to the unique needs and preferences of each client, offering a level of personalization that goes beyond standard advisory services.
• Time Savings and Convenience: By consolidating various financial services under one roof, clients save time and effort, making wealth management more convenient and efficient.
• Peace of Mind: Knowing that all aspects of their financial life are being attentively managed by professionals provides clients with significant peace of mind.
• Intergenerational Planning and Support: This model facilitates the planning and management of wealth across generations, ensuring that the wealth transition is smooth and aligned with the family’s values and goals.
• Access to a Broader Range of Expertise: Clients benefit from access to a wide range of specialists within the firm, from tax advisors to estate planners, providing a level of expertise that is difficult to match individually.

The shift towards a family office service model signifies a profound evolution in the financial advisory landscape, driven by the desire to offer unparalleled service and value to clients while also securing a competitive edge and fostering growth for the firms and advisors.

The Emergence of Advisor 3.0

With the growth of the family office style and a more integrated, comprehensive approach to advice, more advisors are gradually moving towards this new paradigm that many in the industry are referring to as  “Advisor 3.0.” This evolution comes as a response to the growing demands of clients for a more comprehensive, personalized service that addresses all facets of their financial lives. 

The Great Relationship Transfer

The significance of the ‘Advisor 3.0’  shift becomes even more pronounced in the context of the Great Wealth Transfer. As baby boomers retire, they pass on more than $84.4 trillion to subsequent generations. This epochal event, which I prefer to term the Great Relationship Transfer, presents a monumental challenge and a golden opportunity: for financial advisors who navigate this transition successfully, there is a competitive edge. By adopting the integrated life/wealth advisory model and meeting the needs of younger clients as well as older ones, these advisors will not only inherit the assets but also the trust and loyalty of the next generations.

Let’s not forget that this also marks a time in history where a significant amount of advice-givers and professionals are exiting the industry, and so the challenges (and opportunities) with advisor succession planning are also largely at play here, too. 

The FutureVault Perspective: Client Life Management

Our team at FutureVault firmly believes that the concept of Client Life Management is pivotal to the success of the modern advisor. This approach enables advisors to engage with clients at every stage of their journey, from onboarding through to legacy planning and beyond. 

Using a Digital Vault makes financial information, data, and documents central for the client: all their relevant documents, in one safe place. This sets a firm foundation for the client service relationship, as advisors can now address the entirety of the client’s financial, business, and personal life. 

It also allows clients to relax knowing their documents, and all of the decisions that go along with them, are safe. Living and working in cluttered spaces can cause stress and anxiety, according to the American Psychological Association. It’s reasonable to suggest financial clutter might operate in the same way. 

By addressing the entirety of a client’s financial, business, and personal life (plus keeping it organized and safe) advisors can forge a deeper, more meaningful relationship. This comprehensive engagement strategy serves as a digital moat, enhancing the firm’s competitive position by fostering trust, expanding influence across family members and generations, and ultimately, creating a highly referable business.

The value proposition of adopting a Client Life Management perspective is clear. It allows advisors to become indispensable, guiding clients through life’s complexities with sage advice and integrated solutions. This not only elevates the advisor’s role, it also solidifies their position as a trusted partner across generations.

What is the Long-Term Outlook for Financial Advisors?

The future of financial advisory lies in the ability to build and maintain loyalty not just with the current generation of clients, but with their successors as well. This requires a shift in both mindset and practice as advisors begin embracing a more comprehensive approach to client engagement. 

By integrating services that encompass all aspects of a client’s life, health, and wealth – taking care of ‘the little things’ as well as steering them towards major financial goals – advisors can create a sustainable competitive advantage. They listen. They care. Most importantly, they take care of the details, for everything from retirement plans to this year’s taxes. This strategy enables the establishment of deep, lasting relationships that transcend mere financial transactions, fostering loyalty that spans generations.

The Role of Technology and Personalization

Technology plays a crucial role in facilitating this transformation. Advanced digital tools and platforms are now available to enable advisors to deliver personalized, comprehensive service models efficiently and effectively. These technologies give advisors access to actionable insights, data, and valuable information (including their documents) across a wide array of client needs, from tax planning and estate management to medical and healthcare planning. 

By leveraging best-of-breed technologies, including Digital Vaults, alongside their human expertise, advisors can enhance their value proposition, offering solutions that are both sophisticated and highly tailored to each client’s unique circumstances.

Conclusion

As we look to the future, it is evident that the role of the financial advisor isn’t just evolving; it has already evolved. 

In embracing this new role, advisors will not only ensure their own success but also secure the financial well-being and fulfillment of their clients across generations. The future beckons with promises of deeper relationships, enhanced trust, and unprecedented opportunities for growth. 

Are you ready to meet the challenge?