The Future of Wealth: The changing role of financial advice

Our latest sponsored research delves into the dynamics of the wealth industry today – and unpacks some real-world insights that will shape key wealth trends in 2024 and beyond.

• In late 2023, LSEG sponsored detailed research to better understand changing preferences and emerging trends within the wealth industry. 
• We asked investors across the globe about how changes in the wealth industry are impacting them.
  
• This blog looks specifically at how the role of financial advice is changing.
  

Conducted by ThoughtLab, the research included two global surveys, one of 2,000 investors across countries, wealth levels, ages, lifestyles, occupations, genders and other characteristics, and the second of senior executives at 250 investment providers.

Some key areas probed included: how the role of financial advice is evolving; the impact of experience on investor behaviour; attitudes towards and adoption of AI in investment; and gaps in the sustainable investment space.

In this, the first in a series of blogs that explores the evolution of the wealth industry – and the impact of this evolution on advisors, investors, wealth firms, brokerages and other industry stakeholders – we focus on how the role of financial advice is changing, and what this means for advisors and other industry stakeholders.

Five important headline findings revealed by our research include:

• Using a financial advisor is generally more common among older investors. According to our research, three quarters (75%) of investors aged 59 to 77 and 70% of investors aged 78+ use an advisor. In contrast, just 25% of those aged 27 to 42 use an advisor.

• Those that use a financial advisor are more likely to be ‘very’ satisfied with performance, but also, much less likely to be ‘very/somewhat satisfied’: 
  • In the 12 months preceding the research, 67% of those who do not use an advisor and 57% of those who do use an advisor are ‘very’ or ‘somewhat’ satisfied. 
  • That said, those using advisors are far more likely to be ‘very’ satisfied than those who don’t, with figures revealing 21% and 12% respectively, suggesting that self-service solutions are perhaps not yet fully developed. 

• There is a consistent view on the value of advisors – regardless of whether respondents use one or not, with 45% of those who use an advisor and 51% of those who don’t saying that the greatest potential value an advisor can add in the next 3 years is to provide trusted investment advice. 

• Most investors (51%) agree they are more willing to pay for financial advice when faced with market volatility and complexity, but a majority (54%) also think that, because of advances in tech, they won’t be using one by 2030.

• Loyalty to advisors will remain robust, although investors in EMEA (74%) appear to be less convinced than those in North America (82%) or APAC (81%) that they should continue with a financial advisor over the next 3 years. 

Let’s take a closer look at these key take-aways and unpack what these insights mean for wealth industry players.

A key theme to emerge from our research is the role of trust within the industry. This thread of trust begins with trust in data and technology and runs through to the foundational role of trust in a successful advisor/client relationship. 

The rapidly accelerating digitalisation that continues to transform the wealth industry is changing both advisor roles and client experiences in myriad ways, but trust remains the bedrock. 

Assessing the dynamic wealth environment through the lens of financial advice and its future role, it becomes clear that the role of the advisor in the investment equation needs to pivot. Going forward, advisors will need to demonstrate that the advisor/client relationship adds real and tangible value, specifically through personalisation and the delivery of trusted advice.

We expect that a hybrid digital and advice model will gain traction in the long run, with providers needing to strike the right balance to service the diverse needs of their customers. To remain relevant, advisors will need to leverage next-level tech to help them provide streamlined, digital support that is cost-effective, but also allows for personalised touch points that maintain the trust relationship. 

Consistency in data and the customer experience across all models – advisor-led, digital and hybrid – and across all channels will be extremely important.

In short, our findings reveal that, despite ongoing digitalisation, the value that advisors bring to the table is not in question. Although it is clear that their role must continue to evolve against a changing wealth backdrop, the efficient use of technology can empower advisors to boost their productivity, easily access broad and deep data, and deliver value-added insights that will underscore their most valuable offering: trust.

The research covered four regions – Asia Pacific, Europe, the Middle East, and North America. By wealth level, the largest shares comprised mass affluent (25%) and high net worth (25%), followed by very high net worth (18%). By age, the largest share consisted of Gen X (31%), followed by Baby Boomers (30%).

The study also included a benchmarking survey of senior executives from a cross section of 250 wealth management firms, from independent wealth advisors and private banks to wealth management divisions within regional and international banks.