As we race towards the end of another financial year, take a glance across the pond at the key trends in the USA for financial advisers in 2022
Keeping an eye on the key trends in the States is a sure-fire way of keeping your own operations ahead of the curve.
With 5th April edging closer, pick through some of the most valuable insights shared in the US.
After years of unsteady markets, 2022 promises to bring inflation back with a bang – and advisers should be urging clients to plan accordingly.
While many advisers, low-risk investors or those with limited experience may prefer to wait out this inflationary period, others will want to ride the wave.
According to Bryan Stivers, investment adviser and founder of Stivers Financial Services, "investors and advisers alike will be looking to reallocate funds to investments that have the potential to do well during inflationary times," he says. "Historically, these have been sectors such as energy, utilities, consumer staples, health care, banking and other inflation-friendly sectors."
However, in uncertain economic times it could be suggested that 'Zero is the hero’, and focus should be placed not on making gains, but instead on avoiding losses. With inflation rising, this could well be one of those times.
The digital revolution is here, and it has brought with it significant changes to the financial sector. It is now easier than ever for investors to access their accounts and see how their portfolios, not to mention the markets themselves, are performing.
Seamless digital portals are expected to one day be as commonplace as mobile phones are today, offering a quick and easy log-in process for clients who can then manage their money, place trades, and communicate with advisers and planners around the clock.
Access to services like robo-advisers will potentially also become a regular feature for customers in the coming years, and will be completely mobile- and cloud-based.
Such innovations may drastically drive down the price of financial planning and asset management for the public, since these automated, algorithm-driven financial planning services will be able to follow highly sophisticated strategies that employ a measure of judgement regarding buy and sell decisions – without the need for human supervision.
In a recent whitepaper, Joe Coughlin, director of the Massachusetts Institute of Technology's AgeLab, wrote that clients' experiences during the coronavirus pandemic were a bit like a retirement test-drive.
Since the pandemic intensified the amount of time we spent at home, it made us rethink the important things: where we live, how we work, with whom we spend time, how we get around, what we do for fun and how we leverage technology. Now, many of us have a better idea of what retirement life might actually look like.
Ryan Sullivan, managing director of applied insights at Hartford Funds, believes financial professionals can help clients discover what lessons they learned during the pandemic and apply those learnings to their financial planning and retirement goals. He suggests asking clients the following questions about their pandemic experience to help with their retirement planning:
How did they feel about where they were living?
If they worked remotely, what was that experience like?
With whom do they wish they could have spent more – or less – time?
Did they stay busy or were they quickly bored?
Were they pining for travel or content to stay home?
How much did they spend while in lockdown? Was it more or less than expected?
How did they maintain their physical and mental health?
Some of your clients might now want to retire earlier, while others want to maximise their enjoyment of life before reaching retirement. Either way, advisers still need to help clients plan for a retirement that could now last upwards of 30 years.
At the other end of the professional journey, of course, is a generation of young workers who may substantially outlive their parents. Modern medical advances in areas such as cancer research are combining to push average projected lifespans into the 90s, making retirement planning even tougher to navigate.
One of the many results of the pandemic was to fast track the transition to hybrid working. But while restrictions in the UK come to a close and we begin to live with the virus, many advisers may not want to be too quick to abandon the practice of hybrid communication models.
The numerous benefits of a more flexible working style can enable advisers and clients to use their time more efficiently, all while making it possible to ‘see’ each other on a more frequent basis. Virtual meetings can also enable advisers to engage with other people in their clients' networks, such as family, friends or other professionals.
But as with anything, advisers should err on the side of caution when moving towards a hybrid communication model. For such a model to be effective, financial advisers will need to put the same amount of thought and effort into refining their virtual meeting experiences as they do with in-person meetings.
Big tech companies are circling the finance sector, wanting not just a piece of the pie – but the whole thing. According to Insider Intelligence, companies like Apple and Amazon could grab up to 40% of the $1.35 trillion in US financial services revenue from incumbent banks.
With the launch of the Apple Card, Apple could open doors to additional financial tools like debit cards or PFM applications. Meanwhile, Amazon could bring Amazon Pay in-store, which has the potential to attract merchants by saving them interchange costs, cutting into a $90 billion annual source of revenue for issuers and networks.
And with 54% of respondents to a Bain study indicating that they trust at least one tech company more than their own bank, consumer trust is making big tech players a huge threat in the finance industry.
Environmental, social and governance (ESG) matters are becoming a focal point across all industries, and finance is no different. The rise of ESG that we have seen over the past few years is likely to continue in 2022, remaining a priority in the corporate sphere.
According to research from Bloomberg, ESG assets are forecast to hit US$53 trillion by 2025 (a third of global assets under management) and the $2.2 trillion ESG debt market is forecast to hit $11 trillion in the same year. ESG investing has become a prevailing part of investing, and the year ahead will no doubt reflect this.
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