Financial advice, like so many forms of advice, is a uniquely human endeavor. While the internet has a virtually unlimited depth of raw information to access and apply to one’s self, the opportunity to get perspective on your situation from someone else, who can read between the lines and help you recognize what you may not even understand about yourself, requires another human being (ideally one who has a little more expertise than you to help with such realizations). Which, along with the human-to-human accountability that is hard-wired into our brains as herd animals, is what helps financial advisors to withstand the threat of robots.
Yet notwithstanding the fact that financial advisors are paid to give advice to their clients in meetings with clients, the latest Kitces Research study reveals that the typical financial advisor spends no more than about 50% on direct client activity-related tasks, and barely 20% of their time actually meeting with clients! In fact, the typical financial advisor spends as much time searching for the next new client (i.e., prospecting and marketing for business development) as he/she does meeting with all their existing clients from week to week. A phenomenon that has only recently begun to shift with the rise of the recurring-revenue fee-based model, that puts less emphasis on continuous business development for new clients relative to the ongoing servicing (and retention) of existing clients.
Still, the fact that so much of an advisor’s time is not spent directly on client activities, and that even the majority of client-related tasks are more “back office” in nature (e.g., client servicing, meeting preparation, and doing various analyses) suggests that there is room for a significant increase in advisor efficiency, either through delegation to staff, better technology, or both.
And fortunately, the data reveals that advisors who delegate to support staff are able to generate significantly more revenue and generate a higher income… except as it turns out, this is largely accomplished by providing more time and more services to clients in the aggregate (between the advisor and his/her support staff), which allows the advisor to move “upmarket” and attract more affluent clients (who each pay a greater fee). Similarly, the rising use of more capable financial planning software amongst advisors doesn’t appear to be generating any time savings efficiencies, and instead is being leveraged by financial advisors to go deeper with clients and do more in their financial plans (rather than simply doing the plans faster).
All of which raises the question of whether the limitation on a financial advisor’s time and client-facing activities is really a matter of technology and staff efficiency in the first place, or a more “human” limitation on how many relationships any one person – or any one advisor – can manage in the first place. As thus far, the inexorable rise of technology continues to not lead financial advisors to service more clients, but instead to provide more and deeper services to their clients. Which suggests, in the extreme, that ongoing technology efficiencies may not increase advisor productivity, and instead will simply bring down the cost of financial advice and make it more accessible… which in turn will only further exacerbate the existing talent shortage of financial advisors in the coming decade?
source https://www.kitces.com/blog/how-do-financial-advisors-spend-time-research-study-productivity-capacity-efficiency/
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