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And yet, while some advisors are hesitant about going more deeply into social media, their world already is being reshaped.

Traditional Wirehouse Ecosystem

FIGURE 2.3 Traditional Wirehouse Ecosystem

Take the wirehouse channel, for example. These top-of-the-food-chain brokerages have long had established ecosystems in which information and services were organized and the roles of brokerage, advisor, and investor client were fairly clear. Wirehouses could dictate products and fee structures, and their advisors and clients would get in line (see Figure 2.3).

But advisors increasingly are finding alternatives to toiling in the wirehouse world. They're moving toward independence, bolstered in their efforts by third-party providers of every service from technology needs to asset management. Indeed, the registered investment advisory channel alone grew from 34 percent of all financial industry advisors in 2007 to an expected 47 percent in 2013, according to the industry research firm Cerulli Associates.[1]

Through technology and social media, advisors are finding new communities and capabilities to build their business – capabilities that allow them to work with open architecture brokerage platforms that don't dictate what securities they must buy, for example. And there's change occurring at the bottom of the investor market as well. So-called robo-advisors – firms that offer automated financial advice to low-asset investors for cut-rate fees – are growing as demands grows for advice among the mass affluent and tech solutions proliferate in response (see Figure 2.4).

The New Ecosystem Provides Greater Access to Advisors and Investors

FIGURE 2.4 The New Ecosystem Provides Greater Access to Advisors and Investors

Source: Finect

This shift is presenting both new opportunities and challenges. Financial professionals and firms face increasing pressure to discover, market, and network more efficiently and cost-effectively. And while business growth and marketing remain top priorities, regulatory changes and compliance issues also rank among the top concerns weighing on leaders and advisors. As a result, more than half – 63 percent – of all registered investment advisors say that investing in technology is far and away the top infrastructure investment they anticipate making over the next six months to accommodate business growth (see Figure 2.5).

And there's one other critical trend: the aging client base. We all talk about the generational wealth transfer – by some estimates totaling $41 trillion over 40 years – that is taking place. But have we thought about who, really, will be making those financial decisions – and how? By 2020, two-thirds of wealth is expected to be held by women. Already, the majority of women change advisors after the death of their spouses, according to LIMRA research (see Figure 2.6).

Top Business Concerns among RIAs

FIGURE 2.5 Top Business Concerns among RIAs

Source: TD Ameritrade

And how are these busy women juggling work, family, and elderly parents? By going online and using their mobile devices. Yes, women continue to rely on the Internet more than men–a trend we saw in the early Internet days–and with new hubs and networks now at their fingertips, social media is the way to connect and engage with them.

Top Industry Trends Pose a Challenge

FIGURE 2.6 Top Industry Trends Pose a Challenge

Source: TD Ameritrade

Asset Managers Talk about Going Social

FIGURE 2.7 Asset Managers Talk about Going Social

Source: Finect

So it's a changing world, both for investors and the advisors they work with. Social media clearly will accelerate the pace of that change in the years ahead. And yet, in many ways advisors feel held back in the social world (see Figure 2.7).

  • [1] Cerulli Associates, “Advisor Metrics 2013: Understanding and Addressing a More Sophisticated Population, ” 2013-understanding-and-addressing-a-more-sophisticated-population-P000101.
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