Financial advisors are at the center of an evolving landscape. These skilled professionals wear a variety of hats, sport various levels of training, and offer a wide range of services. This legacy profession now faces a changing working environment which is squeezing financial advisors.

These six broad categories illustrate the trends impacting the profession.

1. Complex Financial Landscape

With the shift from defined benefit plans to fund workers’ retirement to defined contribution plans, the entire industry is becoming more complex. In the past, a worker’s employer handled the pension and the worker was confident that with Social Security and the company pension, her retirement needs would be taken care of.

Today, the worker takes a job with a new company, where she’s informed that she’ll need to fund her own retirement via the corporate 401(k). She visits a financial planner for guidance and not only does she bring her own retirement worries, the planner must integrate her spouses retirement plan along with the more expensive college funding for the kids, and potential liability of helping her elderly parents. (For more, see: Social Security Changes for 2015.)

Any wrong move in this plan, sets off a downward spiral of financial pressures for the entire family. In today’s world, the scope of the financial advisor’s duties is broader than ever.

2. Expanding Industry Compliance, Regulation

The evolving industry standards may be helpful for the consumer, but are stressing the financial advisor. The financial planning industry is already regulated. Yet, with the losses during the banking crisis of 2008 along with the damage from the Bernie Madoff scandal and other Ponzi schemes, regulators are in action.

The Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) of 2010 made expansive changes in all areas of the financial services industry. The industry regulation changes continue into the present requiring advisors to pay additional fees and hire personnel to implement the changes.

The Department of Labor is currently working on a plan to protect workers and retirees from receiving conflicted investment advice. The deadline for these new rules continues to be pushed back, but it's likely that additional regulation will result in added costs and oversight for the financial advisor. (For more, see: What You Need to Know about the Fiduciary Standard.)

3. Squeezed by Technology

Technological advances give advisors access to reams of data and analytical tools along with expedient communication applications. But there's also a negative aspect to technological innovations impacting advisors today. Technology is disrupting the financial advisors situation. Technology enhanced advisors, also called “robo-advisors” with varying levels of service and automation are offering financial planning services with reduced fees. In spite of the fact that most are relatively small in size, in comparison with the established advisors, their growth is explosive. (For more, see: How Financial Advisors Can Adjust to Robo-Advisors.)

Standalone technology enhanced advisors range from a provider who will manage a portfolio of index funds for investment fees as low as zero for under $10,000 to 0.25% for larger portfolios. Other participants in the growing online investing field have varying fee schedules. Some providers link to all the investor’s assets, others do not. There are even some of these new technology advisors who offer access to live financial planners as well.

Even the old guard — discount investment brokerage — companies are creating offerings to compete with these newer investing platforms. All of these new developments place downward pressure on the investment advisors’ fee structure.

4. Dearth of Human Capital

It may seem ironic that the field is exploding with new investing platforms and yet is also being squeezed by a lack of new financial advisors. This occurs because many of the older, established financial advisors are retiring. This leads to a lack of new professional blood for the void left by the retirees. In other words, demand for advisors is outstripping supply.

Top notch financial advisors with training, experience, and certification take years to cultivate. As the older professionals retire, the industry continues to seek high-caliber replacements. Staffing is a problem for the diversified financial planning firm. When the goal of the company is to develop a diverse organization of financial advisors, able to fulfill all the clients’ vast monetary needs, there aren’t enough new advisors to replace those who are retiring. (For more, see: Is a Career in Financial Planning in Your Future?)

5. Fears of Declining Asset Values

In earlier times of defined benefit plans, when employers bore the burden of coming up with an income stream for their retirees, the workers were free of concerns about market volatility. After all, these corporate personnel were confident that in retirement they could count on a monthly Social Security check as well as a pension check from their former employer.

Today, the individual is primarily responsible for the quality of his own retirement funds. Sure, older workers remain confident in the Social Security system, but Gen Y and Millenials are faced with fears concerning the stability of the government’s safety net. Compounding the fears about the future of Social Security, are other issues about managing a 401(k) or IRA. Since a portion of the retirement nest egg is the wage earners responsibility, when markets drop, there is a totally different impact on the financial advisor. The advisor must be equipped to manage the client’s mental state and their money. The advisor needs an entire skills set including a deep understanding of market history paired with interpersonal dexterity to calm the fragile client's nerves. (For more, see: The Generation Y Investment Portfolio.)

On a practical note, this creates more risk averse investors, who still need to earn greater returns. Consequently, the advisor is plagued with the task of squeezing greater returns from lower risk assets. (For more, see: Financial Advisors Need to Seek Out this Group NOW.)

6. Demand for Lower Revenue Services

Many of the current trends squeezing financial advisors today result in a reduced fee structure. The industry is undergoing a shift from a transactional based fee structure to one that is fee based. For example, the traditional stock broker who is compensated for each client trade, is going by the wayside. This shift puts downward pressure on the advisors’ margins. (For related reading, see: Why the Best Financial Advisor Might be You.)

Additionally, the increasing demand for more simplified investing approaches is leading to packaged methods incorporating index mutual funds and exchange-traded funds (ETFs). These types of strategies have advantages and disadvantages. A packaged system enables advisors to accommodate a larger client load. A downside of these schemes is a reduced fee structure. (For more, see: Paying Your Financial Advisor: Fees of Commissions?)

The Bottom Line

Financial advisors are in the center of a larger industry wide change. Technology, new regulation, retiring financial professionals, and novel types of services are impacting the field. For successful adaptation, the financial professional is well advised to keep abreast of the evolving developments. (For more, see: How to Be a Top Financial Advisor.)

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