Seize Tomorrow's Opportunities Today
Advisor 2020 will show you how to maximize the opportunities facing your business today, and in the future. The financial services industry is experiencing competition and consolidation. Advisors can take advantage of the opportunities created by these changes to grow their business. Advisor 2020 outlines the changes, and provides ideas on how you can benefit from them. Take advantage of NAIFA’s new cutting-edge research study and seize tomorrow’s opportunities today.
Seize Tomorrow's Opportunities Today by Ayo Mseka
Advisor 2020 shows you how to maximize the opportunities facing your business—now and in the years ahead.
Although the financial-services industry is experiencing competition and consolidation right now, savvy advisors can seize some of the opportunities created by these changes. Advisor 2020, the new cutting-edge research study sponsored by NAIFA, outlines some of these changes and offers several ideas for benefiting from them.
The market for insurance and investments has been one of stiff competition, the study notes. In recent years, low interest rates have put pressure on insurance carriers’ bottom lines and some have left the market. Those with a focus on financial advising have seen new regulations designed to protect consumers, while low yields and market returns have impaired companies’ sources of revenue.
But there is light at the end of the tunnel. The time of unusually low interest rates is coming to an end, the study points out. The U.S. economy has improved, and the only lagging measure in the economic turnaround has been the high rate of unemployment.
As financial markets and the interest rate environment begin to normalize, carriers will re-enter the market with new products, according to the study. One such product could be low-cost, customized mass-produced life insurance delivered through online and virtual channels.
Because new entrants and products would heat up the competition in the life insurance market, advisors will need to be discerning in the solutions they recommend to their clients and exercise care in choosing insurance companies that are financially strong, highly rated, and able to respond to changing markets.
Competition will also intensify among firms of all types, the study notes. There will be a growing demand for retirement solutions, which will attract new entrants to the market. At the same time, there will be a greater burden on smaller companies to update their technology, securely manage large amounts of data, and implement new regulatory policies. This could lead to even greater consolidation among small and midsize firms and brokers/dealers.
The Industry in 2020
By 2020, the study predicts, the result of this consolidation and competition in the market will likely be a barbell-shaped industry—with larger companies dominating the high end of the market, and many smaller firms growing organically in niche or local markets.
Large organizations will compete fiercely for the best talent by highlighting their compensation packages, financial strength, technology systems, support staff and advisor teams. To compete, smaller firms will concentrate on providing unique work environments and professionaldevelopment experiences to train and keep advisors and other staff.
Better technology would allow clients to analyze complex plans online. Insurance companies could look to revitalize growth in the middle market by offering simpler products that can be sold online or through a noncommissioned sales force. By 2020, the study notes, advisors could see increased demand for, and supply of solutions aimed at the middle market.
In addition, inexpensive analytical systems for consumer use could lower expenses by allowing consumers to explore the cost and coverage of products before contacting an advisor. These disruptive technologies will squeeze compensation on products and may lead to new roles for advisors who, for certain products, will focus more on customer support than on prospecting and commissioned sales.
A revitalized middle-income market will create opportunities for advisors who are positioned to seize them, according to the study. Some middle-market products that could see growth are lifetime income annuities, longevity insurance, long-term-care insurance, and combination products.
Advisors in smaller firms could be in the best position to create a “virtuous” circle by creating shared value between themselves and their communities. This is true especially for firms with a strong presence in niche markets, which may be overlooked by larger firms. Clients in those markets appreciate advisors who take the time to understand and care about them.
This article appeared in AdvisorToday.
Topics: Practice Management