Thursday, 20 October 2016

Five Challenges Financial Advisers Are Facing All Over the World

Financial services encounter a number of challenges and financial advisers are facing even more, as they deal with client expectations, regulations and poor market performance. Natixis Global Asset Management has conducted a study of 2,550 advisers in 15 countries to identify the most challenging issues advisers face. The survey has revealed the top five challenges:

Credit: Jack Waymire
Managing ExpectationsManaging client expectations on investment returns is one of the hardest subjects financial advisers are dealing with. Many individuals do not understand that actual returns are different from investment returns. The study has shown that people, on average, are expecting returns 9.5% above inflation, when advisers are expecting only 5.3% above inflation. Expectations, however, differ in various parts of the world. In Hong Kong, for example, individuals return expectations are 9.3% compared to advisers 5.5%, while in the UK the figure is 8.3% to the advisers expected returns 3.8%.

Price vs ValueAnother challenge is to keep up delivering service at lower cost. According to the study, in Hong Kong 80% of advisers are feeling pressure to lower fees. With the rise of technology, many companies develop platforms for clients to be able manage their lower-balance plans. Despite the fact that the majority of advisers don’t see the future in robo advice, they have to face a possible future of clients managing their plans without the help of a financial adviser.

CommunicationNatixis research indicated almost half the clients (41%) named performance as a reason to end the relationship with their advisers. The majority listed advisers as not understanding their goals, didn’t justify their fees and didn’t communicate frequently. Funnily enough, 71% of advisers when asked why clients leave, said failure to communicate frequently with clients is a major failure. It also has been stated that one of the biggest areas of interest for investors is client education, with investors admitting they would have a better chance of achieving their long-term goals by improving their investment knowledge.

Alternative InvestmentsIn the current market of low yields, high correlations and volatility, advisers cannot rely on old fashioned methods anymore. 73% of respondents think stock and bond portfolio is no longer enough to manage risk and pursue investment goals. The majority believe they will need to replace traditional variation and portfolio structure techniques with new approaches.

RegulationWith the financial crisis and recent events there has been a wave of modifications by regulators, to make sure the financial services industry puts investors first. More than 80% of advisers said heightened regulation and disclosure requirements are compromising the growth of their business. 70% believes they can make some changes in their business model as a result of new regulations and close to half (48%) say they will need to change their business model to keep up business growth. Many believe stronger regulations will cause increases in client costs.

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