Top Challenges for Financial Advisors

Financial advisors today have a myriad of challenges facing them in their daily practices. They must wear many hats, including those of asset manager, financial planner, psychologist and marketer in order to succeed. And while most advisors can wear some of these hats well, there are always one or two roles that most struggle to play.

Here are some of the biggest challenges that advisors face today in their efforts to grow their business and promote their brand to the public.

Key Takeaways

  • Nobody said being a financial advisor is easy work—but many of the challenges facing advisors have little to do with finances or investment choices.
  • Much of the challenges involve maintaining relationships with clients and managing their expectations.
  • Independent advisors that don't work for a larger firm may also want to find support from professional organizations instead of going it totally alone.

Managing Client Expectations

This is an area where advisors need to understand client psychology in order to succeed. While managing a client’s portfolio may be a very straightforward endeavor, managing their expectations can be much harder. Many clients have unrealistic expectations when it comes to investment returns and interest rates.

Advisors need to be able to show their clients how they add value to the investing equation. One of the ways that they can do this is by helping clients to maintain a long-term perspective in their investing so that they don’t go off track with every movement in the market. Of course, it takes time to do this consistently but clients who can begin to see how their advisor is keeping them on track will be much more likely to remain loyal to their advisor.

Staying in Touch

Advisors have more ways than ever to stay in close contact with their clients, but many fail to do so when things are going well. A constant flow of communication is necessary in order to maintain a solid relationship with most clients, regardless of what the markets are doing. Advisors may want to take advantage of such services as Skype and instant messaging in order to keep in touch with tech-savvy clients.

Managing Information

Some advisors get caught up trying to stay abreast of the ocean of information that’s available online and elsewhere. Smart advisors focus more on client behavior instead of reacting to the latest news. Advisors also need to be able to direct their clients to reliable sources of data that have stood the test of time in terms of accuracy. This can help to prevent misunderstandings and prevent clients from making mistakes based upon misinformation.

Emotional Engagement

Many financial advisors are very rational, analytical people who think logically. However, many client decisions are based upon emotion. Advisors need to be able to relate to their clients on an emotional level in order to maintain a working relationship. This may involve explaining the emotional ramifications of an investment or planning decision, so that they client can see how it will impact them on an emotional level.

Group Support

Independent financial advisors may often feel alone in their practices and have little in the way of planning support. Advisors who struggle with this can find support in organizations such as the Financial Planning Association and the National Association of Insurance And Financial Advisors (NAIFA) or the National Association of Personal Financial Advisors (NAPFA). These groups can provide a wealth of resources in marketing, sales, practice management and other aspects of the profession that can make advisors’ lives easier.

The Bottom Line

It is more important than ever for advisors to understand where their clients are coming from and make them understand the value that they offer. Those who are able to successfully manage their clients’ expectations can improve retention and their bottom lines. Joining one of the professional associations can also provide additional support.