As an investor, it pays off to jump on life-changing opportunities early. But that’s far from the reality if you are relying on a financial advisor who seems stuck in the past with outdated advice.
That is the pain that many investors go through. Some financial advisors don’t get that the world is shifting, and relying on traditional methods means missing out on lucrative opportunities.
Technology is accelerating most of these changes, and new investment options are sprouting up each day.
In the future, the landscape of financial advice will look very different. So, if you don’t want to miss out, keep an eye on the trends to refine your financial decisions.
In this article, we’ll dive into some of the trends that are reshaping the industry, giving you a glimpse of what’s coming and how you can stay ahead of the curve.
1. Artificial Intelligence in Financial Advisory
Artificial intelligence (AI) and Machine Learning are the trendiest technologies that are affecting almost all aspects of life. The financial advisory industry is not spared. Some elements of the financial advisory industry are already experiencing the impact of AI.
Currently, AI is mainly used to supplement the work of human advisors. For instance, financial planners often rely on AI and leading tech to analyze data to make informed investments and advise their clients. With the help of predictive analytics, a key feature of machine learning, financial planners can predict market trends and potential risks that clients may face. This improves the accuracy of financial advice that they give clients. In short, AI equips them with powerful tools that they can use to dispense sound financial advice.
Additionally, AI tools such as chatbots enhance interactions between clients and financial advisors. They act as virtual assistants as they can answer some queries for clients. Advisors like the certified financial planner Hong Kong who use AI automated tools, are capable of giving financial advice with high accuracy by leveraging algorithms to analyze real data aligned to your financial goals to offer advice and even make investments for you.
2. Blockchain and Cryptocurrency
Blockchain technology is an emerging trend that promises to revolutionize the financial advisory industry. It can enhance transparency when making financial transactions. On the other hand, cryptocurrency is already becoming mainstream and it’s being embraced by governments worldwide.
So, what impact will the two technologies have on the financial advisory industry? Financial planners and advisors should learn more about the two trends. This will ensure that they give clients accurate advice.
Smart contract, a product that is based on blockchain technology is expected to automate the process of making agreements in the financial advisory industry. You won’t have to go through intermediaries to sign agreements with financial planners.
3. Regulatory Technology (RegTech)
As much as the new technologies are powerful and efficient, they still need to be regulated. This is where Regulatory Technology (RegTech) comes in. It encompasses a set of tools and processes that are designed to help businesses comply with all the required regulations.
How does RegTech work? It uses emerging technological tools such as blockchain and AI to automate all the required regulation processes. The tools collect data from various sources and then analyze it. From their analysis, they can detect irregularities and anomalies. They then generate reports that can be used for decision-making.
RegTech automates the compliance process, making it easy for businesses in the financial advisory industry to optimize their processes.
4. Changes in Demographics
We are witnessing gradual shifts in the client population that make up the financial advisory service industry. The changes of the players automatically mean changes in expectations. This is because different demographics have different needs.
Millennials and Gen Zs are forming the largest percentage of players in the industry. Their financial behaviors and expectations are very different from those of their older counterparts.
For instance, most Gen Zs seem to have a carefree attitude and are not afraid to spend. The generation is also entrepreneurial. The majority of the population that is making up the industry is tech-savvy. It is also more informed because technology makes it easy for users to learn.
Financial advisors have to consider such behavior and trends when providing guidance.
5. Growing Demand for Holistic Financial Planning
Financial advisory services are going beyond the finances; they now cover other aspects of life that have a direct impact on the finances. Topics such as health, wellness, retirement, estate management, and many others factor in the financial advisory services. This means that financial advisors should broaden their knowledge and expertise to cover such fields.
The need for wholesome financial advice may lead to the development of integrated advice solutions. These are platforms that combine all aspects of life when giving financial advice. An interdisciplinary approach may also be a key feature that will emerge to provide holistic financial planning.
Here, financial advisors will have to partner with experts in other fields, such as health and wellness experts, real estate planners, and many others.
6. Increase in Sustainable and Ethical Investing
Environmental, Social, and Governance (ESG) is becoming a trend and is being incorporated into the financial advisory services industry. Most clients in the industry are keen on investments that align with the ESG agenda.
This will motivate financial planners to research the best investment options that promote environmental sustainability and good governance. It has already been proven beyond doubt that companies that embrace ESG outperform those that put minimal effort into this subject.
Conclusion
The future of financial advisory services goes beyond technological innovation. It encompasses key human elements such as ethical factors, personalization, and trust. Emerging economic needs are also key drivers in determining the future of this industry.
Combined with the emerging trends that we have just discussed, they are expected to define the future of this industry.
As someone intending to get financial advisory services, you should focus on looking for financial advisors who are already embracing the future trends. Similarly, you should be open to any changes. Take time to observe the trends that are expected to shape the future of the financial advisory service industry.