There’s a lot of opportunities to consider in 2016, emerging markets, a new presidential election and a rise in household investable assets. How best can advisors prepare to make the most of this opportunity?
With household investable assets expected to grow by 11% before 2020, what else can financial advisors prepare for in 2016?
With 2016 just around the corner, those financial advisors looking to make the most of the new year will be asking themselves what the industry can expect in 2016, and how best they can prepare for these predictions.
There’s a lot of excited forecasting going on so we’ve saved you the trouble and pulled together the trending topics from a number of reliable sources.
Emerging Markets, Increase in Household Investable Assets and Optimism for Growth Policies
A recent report by Deloitte suggests that there are significant growth opportunities for Financial services in emerging markets in 2016. Deloitte specifically focused on emerging markets in the Asia-Pacific Regions (China, India, Malaysia, Thailand, and Vietnam).
For those firms with limited international experience the report encourages these companies to look beyond the daunting challenges of international expansion to focusing on the opportunities these countries offer:
1). Attractive growth rates, emerging markets tend to grow faster than mature markets which creates a demand for basic financial services. Foreign firms with established footholds will benefit significantly as these emerging markets transform.
2). Limits on domestic growth, organic growth in developed countries is somewhat prolonged and difficult. However emerging markets can offer alternatives to the constraints of mature economies.
3). Revenue diversification, emerging economies potentially offer revenue diversification for foreign firms who are facing burdensome regulations and limited growth in their domestic markets.
Asides from emerging markets there is still plenty of hope for opportunities within developed economies. Joseph LaVorgna, Chief USA Economist at Deutsche Bank, has optimism that the newly elected President will focus on growth policies since the current economy hasn’t done well. Although, these benefits may not be felt until 2017.
McKinsey & Company have predicted that the increase in investable assets from households will outperform GDP growth. Although these predictions are expected over the course of the next 5 years, 2016 will be a significant year for growth with financial confidence on the rise within households.
With the growth in households who have enough investable assets to require financial advice at 11% per annum, compared with total GDP only expected to grow by 3%, financial advisors will find household investment opportunities within North America, South America, Europe, and Asia.
Financial Firms Expect Growth with a Focus on Internal Culture
A 2015 Registered Investment Advisor Study of 373 independent advisors found that in 2016 advisors want to focus on growing their businesses. This focus on growth is seen as primarily coming from providing exceptional client service. However, firms are also looking at technology and talent management as a focus on client success.
Focusing on internal culture and team infrastructure is also a trending focus for firms in 2016. Culture is no longer an option but a necessity. Companies that are growing are finding employee complexities, which are making it difficult for further growth. Technological infrastructure is being put in place to create accountability, ease communication – both internally and externally and drive transparency.
Preparing for 2016: Compliance Assistance, Diversified Payment and Investment Options and Communication Technologies
Firms looking to make the most out of 2016 should already be embracing the FinTech revolution. Although a number of firms are holding out due to the fear that older generations are less likely to embrace technology and perhaps because Advisors themselves are less comfortable with technology.
Millennials tend to be more familiar and comfortable with new digital advice technologies but, is definitely not limited to them. Cogent Communications reports that 30% of affluent investors using technology are over 50 years of age. In 2016, we are likely to see many advice firms adopt robo and virtual-advice technologies into their practices.
Robo-advice technology is heading mainstream and rather than a threat to advisors, it offers significant opportunity for firms to streamline their practices, adopt cutting-edge marketing automation and client management tools, deliver digital engagement to their clients, and expand their client base into lower balance ‘C and D’ accounts. In the US and Australia, there is development by providers that will white label and embed robo-technology into practices to support rather than compete with the human adviser.
Financial technology also helps significantly drive lower costs for advice while also making more services available. This is great news for the large number of the population who do not receive any form of financial advice. In 2015, roughly 80% of Australians do not receive any form of advice.
In addition, McKinsey & Company also found that regardless of wealth level or age there are a significant number of investors comfortable working with ‘virtual’ financial advisors. Virtual Advice leverages the use of video-based tools to connect the human and digital advisors together with the client. This combination, of robo-tools, video collaboration and the human has been coined the ‘bionic advisor’.
2016 will also see the continued development of Compliance tools. Compliance is commonly a dreaded word, it can be boring and painful, but the stakes are higher, regulations for online and offline transaction are tougher and the rising threat of international fraud and identity theft is putting pressure on financial institutions. Companies have more work to do when it comes to compliance.
Fortunately, SaaS (Software as a Service) companies are doing their best to support advisors in their fight for compliance. Finally, advisors should also look to diversifying payment options for clients. With more global and online transaction providers offering significantly better value than traditional players, especially in the foreign exchange segment.
2016 is shining brightly on the horizon, make sure you’re using financial technology to set you firm up for success.
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Author: Orlando Werffeli, Digital & Content Strategist