Financial Advisors in The US

Goals

To provide the general perception of financial advisors in America today, to include positive & negative perceptions. To determine the trends in financial advising and the number of financial advisors that include real estate investing as part of their strategies. Additionally, to determine how a financial advisor can differentiate themselves in today's society with Robo-advisors: BetterMint, M1, etc) and the number of advisors that charge a flat fee versus a percentage.

Early Findings

General Perception of Financial Advisors

  • 40% of prospective financial advisors are concerned about overall negative perceptions of the financial industry.
  • A general perception survey about the titled used by investment professionals showed that respondents were confused about the title "financial advisor". The majority believe that financial advisors primarily provide investment advice and are held to a fiduciary standard, even though brokers also use this title.
  • According to the American Association of Individual Investors, about 65% of Americans say they mistrust financial advisors to some degree.
  • According to a new survey by the CFA Institute, only 35% of the retail investors surveyed said that they believe their advisor always puts their clients' interests ahead of their own.

Trends in Financial Advising

  • In the next ten years, robo-advisors will likely be employed by every financial advisory firm in one capacity or another. By then, they will likely be able to follow very sophisticated strategies that employ a measure of judgment regarding buy and sell decisions.
  • The globalization of the world’s economies will result in enormous new marketing opportunities for advisors who will be able to broaden their client bases.
  • The financial industry is in the throes of a digital and marketplace revolution that may result in the availability of low-cost financial planning.
  • Seamless, cloud-based technology will enable round-the-clock mobility for traders and younger clients who have grown up in the internet era. Consumers will want to do more for themselves.
  • There will be greater demand for financial planning as the population ages.

Number of Financial Advisors that Include Real Estate Investing

  • Most financial advisors do not talk to their clients about real estate investing because there is no compensation structure: they cannot be compensated via commissions or a percentage of the portfolio.
  • A licensed financial advisor has to adhere to strict compliance standards and regulations, which are generally restricted to licensed investment products. This makes it difficult for a licensed advisor to give guidance on real estate, which is an unlicensed product, without opening themselves up to possible regulatory issues.

How Financial Advisors Can Differentiate Themselves

  • To develop competitive advantages and avoid robo-disruption, a sound strategy for advisors is to chart a path towards financial planning. That will involve branching out to cover areas including retirement planning, education funding, and insurance.

Advisors That Charge a Flat Fee Versus a Percentage

  • The typical percentage fee for financial advisors is 1%, while the typical hourly fee ranges from $120 to $300.

Proposed next steps:

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