Key Market Trends in The Financial Advisory Industry & The Way Forward

Author: Jim Eckel | | No Comments


“Expect the best. Prepare for the worst. Capitalize on what comes.”, these words by Zig Ziglar, capture the essence of what’s going on with the financial advisory sector today. Financial advisory showed promising growth over the past decade and accounted for 29% of the global consulting industry in 2018. The future of the financial advisory sector looked encouraging, at least until 2020 happened.

The Covid-19 pandemic has created unprecedented challenges for businesses across sectors, especially those like financial advisory that rely on people-to-people communication. Being able to talk to customers and building long-term, trust-based relationships is key to success in the IFA sector. The industry depends on interpersonal communication. What IFAs need right now is to leverage the convenience of remote, digital solutions, without compromising on trust and personal contact. COVID hasn’t altered the fundamentals. However, it has brought about changes that have been a long time in the offing.

According to a Morgan Stanley report, the only way forward for financial advisory firms is to double down on technology investments, strategically cut costs, build differentiated product offerings, and consider inorganic opportunities as a part of their next five-year plan. Keeping these factors in mind, we’ll be looking at five key trends shaping the financial industry right now.

1. Increase in the number of young investors: Empowered by 24/7 digital-based educational technology platforms, millennials are seeking to learn the intricacies of financial markets, cash flow, investments, education planning, and more. They want to educate themselves and invest but lean towards DIY solutions.

2. Transparency is extending to the operational experience: There are two key ‘experiences’ in an advisory firm: the client experience (CX) and the behind-the-scenes operational experience (OX). The introduction of new technology paradigms and digital solutions is fundamentally changing OX. Many clients want to be more involved by leveraging transparency and now often have a choice to manage certain processes by themselves, reducing cost.

3. Holistic Advice on Investments: Holistic advice means financial advisory services that consider all aspects of clients’ lives beyond just their finances. More and more people are opting for holistic advice than ever before due to an increased understanding of their financial health in the context of the current global situation. Many clients are working with an investment advisor, a financial advisor, and a finance coach. IFAs can find value-add opportunities here by consolidating these roles.

4. Higher demand for hybrid pricing structures: Increased demand for diverse services has led to investors and clients opting for just the services they need rather than paying for all services together. Digital platforms connecting advisors with clients enable pick-and-choose service offerings, offering better value, and more flexibility.

5. Independent advisors have an increased demand and value: Pricing changes, new technologies, and the impact of the next generation of clients have increased the demand for independent advisors. Automated and AI-based advisory is still at a nascent stage. Real, human IFAs can help investors secure maximum gains while mitigating risk, while still being more effective than what larger firms can offer to individual clients. Technology is helping IFAs reach out and address this greater demand through IFA platforms and digital marketing.

Where Are Financial Services Companies Putting Their Money? 

Over the past few years, financial services companies have been concentrating on investment in artificial intelligence (AI), blockchain, data analytics, the internet of things, and robotic process automation (RPA). There is a lot of emphasis being placed on building better legacy systems and upgrading existing ones. Many firms are turning towards the cloud to make this happen.

Making the Cloud Transition

Cloud infrastructure enables financial services to reduce costs, provide better and more integrated security, and improve flexibility and scalability, along with efficiency gains. It’s not just about efficiency and scalability, though: the cloud is acting as a catalyst for change in the financial services sector. Cloud interfaces bring costs down, and increase communication and collaboration between global participants, in different locations and time zones.

Blockchain Innovations and Crypto

Cryptocurrencies and their underlying technology, blockchain, are another key area of focus for financial advisory players. Blockchain’s potential is immense: as a zero-trust distributed ledger technology (DLT), it has the potential to the finance sector overall by reducing costs, enabling faster transactions, greater transparency, and more. Let’s look at some of the long-term changes blockchain is enabling right now:

1. Reduced fee on direct payments: The current scenario where banks charge clients a fee on banking services and wire transfers could become a thing of the past with the introduction of blockchain technology. Blockchain payments are quicker, safer, irreversible, and comparatively more cost-effective, leading to lower fees for common services.

2. Transaction details: Blockchain is not just about moving money. It is an excellent method to maintain transparency, as multiple copies of the same data are maintained at different locations. Another way blockchain technology helps is by enabling smart contracts. Smart contracts monitor when a buyer makes a payment, when a teller delivers on their end of the deal and help to handle an array of problems that might arise in between.

3. Increased financial inclusion: High fees, lack of access to their money at the exact moment they want it, and the need to show assets for guaranties, deter many people from using traditional banking services. Blockchain-based solutions can promote financial inclusion and can provide a highly scalable alternative.

4. A digitally secure technology fighting fraud: Blockchain technology resists hacking, DDOS attacks, and other cyber threats. Banks and anyone making a blockchain transaction can readily identify parties through opt-in, blockchain-enabled digital ID, helping curb fraud.

Cryptocurrencies themselves hold promise as a new native digital-native asset class, free from regulation by central authorities. Advisors will find that more and more clients are looking to educate themselves about blockchain and cryptocurrency and to potentially invest in crypto. The opportunities here are immense for IFAs willing to invest time towards understanding cryptocurrencies as an asset class to offer sound advice.


The entire finance sector today is going through a period of major upheaval: rapid technological change, a shift in investor demographics, and greater awareness about the benefits of digital solutions mean that IFAs think fast and adapt to stay relevant. With the rise of DIY and AI-based solutions, existing client bases will suffer a certain degree of attrition. Broadening target audiences to include women, minorities, millennials and other previously under-served demographics is vital to ensure long-term sustainability. Technology doesn’t have to be a threat, though. Digital platforms like FinancialAdvisors.com help IFAs expand their reach and address clients across the country. The key is to understand where the market is heading — towards digital and towards new paradigms like blockchain — and to learn and adapt.

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