Wealth Management

With major technological disruption happening in every industry, it’s natural to consider how the financial advisor industry will change over the coming decades. After all, the industry is unrecognizable to how it was a few decades ago. Here are some of the trends that will shape how the industry evolves. 


People, especially the younger generation, are increasingly spending more time in the digital world including when it comes to managing their finances. Many in this cohort would rather communicate with their advisors over text, email, or video calls. 


Artificial intelligence (AI) presents a threat and opportunity to advisors. AI is being used to augment robo-advisors and give them more interactive capabilities and personalized advice. While this could lead to some market share gains, advisors can also utilize AI to augment their own businesses by improving back-end operations, automating low-level processes, reducing expenses, free up time for client services, and boosting marketing efforts.  


Another major opportunity is the massive aging of the population and retirement of the baby boomer population. As this generation passes, trillions in wealth will be passed down to Generation Z and Millennials. Successful advisors will be able to form trust and relationships with older clients and their children.

Finsum: The financial advisor industry is going to face major challenges and opportunities over the next couple of decades. Demographics and technology are two of the most impactful.


Direct indexing is a new approach to investing which involves recreating an index within an investors’ portfolio which combines the benefits of passive investing in addition to tax loss harvesting capabilities with the potential for increased customization. For these reasons, it’s been growing in popularity especially as it’s become available to a wider swathe of investors.


However, according to a recent report from Hearts & Wallets, a wealth management research firm, most investors remain unfamiliar with the concept. In fact, there is considerable confusion about what it specifically means. Many weren’t able to specifically delineate between ETFs and direct indexing.


Another challenge is that many investors believed that direct indexing was closer in approximation to active investing rather than passive investing and that it would require some sophisticated management. For those who were interested in direct indexing, the potential tax savings were the biggest factor. 


One of the conclusions of the report was that the industry should consider renaming ‘direct indexing’ to something that was more definitive. Too many investors who would be good candidates for these products are dismissive due to an incorrect understanding of its function and benefits. 

Finsum: Direct indexing is growing in popularity. Yet, a recent report on the category revealed some issues that may impede its future growth. 


Financial advisors pour so much time and energy into building their businesses and cultivating high-quality relationships with clients. Yet, they often don’t put in a fraction of the thought when it comes to succession planning even though the implications are massive in terms of maximizing the firm’s value or ensuring that employees remain satisfied and business continues successfully operating. 


For ThinkAdvisor, Buckingham Strategic Wealth’s MIchael Kitces shares some advice on successful succession planning. He recommends starting with honest and frequent dialogue between owners and younger advisors who may have expectations about their role in the firm’s future. Older advisors can also choose to transition at their own pace and may give up certain responsibilities while continuing to do the parts of the job they enjoy. 


Part of this communication strategy is to be open about uncertainty rather than repeatedly changing plans which can lead to frustration. Another common mistake is to think about every decision as being binary rather than thinking about compromises between valid, competing interests. Finally, remember that succession planning is ultimately about maximizing the value of the firm in the present and setting it up for success in the future. 

Finsum: Succession planning is the final major decision that advisors will make in their careers. Here are some ways to maximize your chances of success. 


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