US Financial Planning Industry: Trends
Five trends being seen specific to investment managers and/or financial planners in the U.S. are (1) offering impact/sustainable investment opportunities, (2) more firms and jobs, (3) changing fee models, (4) cryptocurrency allocation and interest, and (5) increasing demand for women as financial advisors.
1. Offering Impact/Sustainable Investment Opportunities
- Investment managers' millennial clients are becoming increasingly interested in impact/sustainable investment opportunities.
- Millennial investors have a profound interest in making a difference in the world, such as issues pertaining to climate change.
- In response to that strong client interest, "wealth managers will increasingly offer sustainable and impact investing as a mainstream service" and increase the array of options they offer in terms of aligning investment opportunities with personal values.
- This trend was noted by Financial Advisor Magazine and Index Journal.
2. More Firms, Jobs, & Clients
- Job opportunities for financial planners in the U.S. has been rising and continues to rise.
- Ernst and Young reported that by 2020, the U.S. will need more than "66,000 financial advisors."
- Since 2013, employment in the financial planning industry has increased 3.6% as has "the number of firms."
- In 2019, the number of people who "provide investment advisory services" increased by more than 20,000 year-over-year.
- In 2019, the number of registered investment advisor (RIA) firms in the U.S. increased by 3.3% year-over-year to 12,993.
- More clients are seeking the services of RIAs. As one source put it, "[m]ore RIAs are providing financial advice to more clients than ever."
- In 2019, the number of RIA clients increased by nine million. That rise in the number of clients was at least partially attributed to robo advisors becoming increasingly popular.
- This trend was noted by CityWire and Brandon Gaille.
3. Changing Fee Models
- Compensation plans for financial advisors "that calculate payout based on a rolling month production average continue to gain in popularity, specifically the rolling 12-month plan."
- From 2015-2018, that rolling plan over 12 months experience a 19% usage increase.
- An article about 2019 trends for financial advisors stated that "[m]ore than half of advisors have altered their fee structures in the past four years, more than a quarter have added planning fees and retainers and more than a third have tweaked their pricing in other ways."
- Financial Advisor Magazine's article titled "Top 10 Wealth Management Trends In 2019" noted that "fees are compressing" and "[f]inancial advisors will respond to a changing marketplace by implementing competitive fee arrangements."
- This trend was noted by Financial Advisor Magazine, Terrapin Technologies, and Financial Planning.
4. Cryptocurrency Allocation & Interest
- Allocation to and interest in cryptocurrency are on the rise among financial planners.
- The Bitwise/ETF Trends 2020 Benchmark Survey polled over "400 financial advisors" in December 2019 about how they are using cryptoassets in their clients' portfolios.
- The survey found that in 2020, there will be an increase to 13% "of advisors allocating to crypto in client portfolios" up from the previous level of 6%.
- Among the financial advisors surveyed, 76% had clients ask them questions in 2019 about cryptocurrency.
- Financial advisors are becoming more-and-more optimistic about the price of bitcoin. The December 2019 survey found that 64% of them anticipate that bitcoin prices will increase "over the next five years." That marked a 9% year-over-year increase on that same question.
- More specifically, by 2024, 35% of the financial advisors anticipate that bitcoin prices will "double or more."
- Five percent of the financial advisors anticipate bitcoin prices increasing by at least ten-times their value by 2024.
- The ETF Trends CEO/Founder stated the following: "Crypto continues to be top-of-mind for advisors searching out new and uncorrelated sources of return. The survey results clearly indicate growing interest in crypto from advisors and their clients alike."
- This trend was noted by Forbes, EFT Trends, and Bitwise.
5. Increasing Demand for Women as Financial Advisors
- An August 2019 article in the Wall Street Journal explained how the demand for financial advisors who are women is increasing among clients and thus firms in turn.
- UBS's Head of Strategic Client Segments has seen a notice rise in prospective clients' requests "to work with female financial advisers."
- The desire for diversity is a key factor driving this trend, as clients want a mix of the people giving them advice. Another key factor driving this trend is the widespread discussion of gender issues in society.
- These client demands have resulted in more women being hired as financial advisors. For example, the training program for financial advisors at Merrill Lynch Wealth Management achieved its highest number of women ever, as it rose to about 3,500 female employees in 2019 and that number "is increasingly yearly."
- UBS and Morgan Stanley are other companies hiring more female financial advisers in response to the demands from clients to work with female financial advisors.
- This trend was noted by the Wall Street Journal and Fortune Magazine.