This has increased the scope for financial advising as the global market grows. According to experts, the size of global financial advisory market grew from 54.8 billion U.S. dollars in 2011 to 61.3 billion in 2014 and it reached more than 63 billion U.S. dollars in 2015.
According to a global survey by Natixis Global Asset Management, the financial advising market growth is challenged by increased fee pressures, tightening regulations, growing competition from automated advice platforms and continued market volatility.
Nevertheless, the US Bureau of Labor Statistics estimates that there is a projected 27% job growth for financial advisors between 2012 and 2022 where the average salary is around 99,920 USD.
This statistics is primarily for starting positions in financial advising companies and is indicative of the growing demand for financial advisory services where companies and even individuals are looking for better quality advice to increase their wealth.
In this condition, experts say that there is a dearth of adequate talent in the industry. In the US for example, Wall Street firms are considering it difficult to find talented individuals to fill out posts.
“Financial advisors are in a business that profoundly impacts the lives of their clients. It’s financially rewarding, there’s a degree of independence, it’s intellectually stimulating. But for some reason we are having a difficultly making it a compelling choice for a large number of people looking for a career,” says Mark Tibergien CEO of Pershing Advisor Solutions, a BNY company.
Some professionals provide some insight into the actual requirements for individuals to make a mark in the financial advising business, to start from valuation, as corporate finance pure player Duff & Phelps points it out.
“The world is full of pure play M&A advisors and appraisal firms, and Duff & Phelps brings both to the table and the two constantly intersect. The cornerstone of any M&A engagement is valuation, and the three pillars of Duff & Phelps include; we measure, we monitor and maximize value. Measurement and monitoring could be in valuation, and maximizing is included in advising as an M&A banker, raising capital or assisting in a restructuring,” says Robert A. Bartell, Managing Director at Duff & Phelps.
In reality, in the context of the modern financial market, advisors are expected to assume three critical roles for their clients - client therapist, investment pragmatist and marketing strategist.
There has been a change in the behavior and demand pattern of corporate clients along with the growth and evolution of the industry over a period of time. Beginning with the financial meltdown in 2008, where investors lost heavily across multiple asset classes and when they valued 'return of capital' more important than 'return on capital'. This gave rise to demand for financial solutions that were simple, transparent and liquidity-oriented products instead of exotic and complex ones. Hence a growing demand for transparency and detailing.
Today financial advisors are expected to have greater clarity and transparency in relation to risk/reward ratio and performance.
The advisory based revenue model gaining prominence over the commission based revenue model for financial advising is a result of this change in behavior.
While creating a challenge for the financial advisors, this has also given an opportunity for the right financial advisory firm to reap the gains from the changed behavior.
Worldwide valuation and financial assessment firm Duff & Phelps is one such example that has sought to take advantage of it.
“It’s important for us to preserve our independence and to avoid and manage conflict of interest. We have an internal process, which is efficient and transparent with very formal engagement acceptance processes. In this world where confidentiality is critical, that is the front end of our internal processes (…) We also live in a very highly regulated world where transparency is crucial. So the way we conduct ourselves and manage our internal processes is something critical,” says Bartell from Duff & Phelps.
“High quality financial advisors, who have nothing to hide, should win 88% of the time – when investors use objective processes for selecting professionals who will influence or control their financial decisions,” says Jack Waymire, financial advisor and founder of investorwatchdog.com referring to a survey done by his organization.
Another change that is helping financial advisors help grow client’s wealth is sector specific specialization attained through team work.
“The team approach makes sense for ultra high-net-worth clients and the corporate, who often have complex financial needs that can involve international holdings, family businesses, complicated estate plans and illiquid assets,” says a recent advisor report from the independent research firm Morningstar.
Duff and Phelps strengthens this observation about the growing complexity of required expertise: “We assess value of almost every assets classes, from tangible assets up to the most complex intangible assets or financial instruments. To be more specific, we perform valuation - and related valuation advisory - of intellectual property like brands and names, technologies and software, but also complex financial instruments like CMBS and RMBS”, says Yann Magnan, Head of European Valuation business unit at Duff & Phelps.
Experts of the industry also believe that future of financial advising rests on a conglomeration of personal knowhow and technology. Be it large and global firms like Duff & Phelps and BNY, or individual financial advisors, integrating personal expertise with technology would certainly give the competitive edge to business.
"Advisors need to understand at every level the mix between technology and personal service," says Alois Pirker, director of research at the Aite Group.
According to a global survey by Natixis Global Asset Management, the financial advising market growth is challenged by increased fee pressures, tightening regulations, growing competition from automated advice platforms and continued market volatility.
Nevertheless, the US Bureau of Labor Statistics estimates that there is a projected 27% job growth for financial advisors between 2012 and 2022 where the average salary is around 99,920 USD.
This statistics is primarily for starting positions in financial advising companies and is indicative of the growing demand for financial advisory services where companies and even individuals are looking for better quality advice to increase their wealth.
In this condition, experts say that there is a dearth of adequate talent in the industry. In the US for example, Wall Street firms are considering it difficult to find talented individuals to fill out posts.
“Financial advisors are in a business that profoundly impacts the lives of their clients. It’s financially rewarding, there’s a degree of independence, it’s intellectually stimulating. But for some reason we are having a difficultly making it a compelling choice for a large number of people looking for a career,” says Mark Tibergien CEO of Pershing Advisor Solutions, a BNY company.
Some professionals provide some insight into the actual requirements for individuals to make a mark in the financial advising business, to start from valuation, as corporate finance pure player Duff & Phelps points it out.
“The world is full of pure play M&A advisors and appraisal firms, and Duff & Phelps brings both to the table and the two constantly intersect. The cornerstone of any M&A engagement is valuation, and the three pillars of Duff & Phelps include; we measure, we monitor and maximize value. Measurement and monitoring could be in valuation, and maximizing is included in advising as an M&A banker, raising capital or assisting in a restructuring,” says Robert A. Bartell, Managing Director at Duff & Phelps.
In reality, in the context of the modern financial market, advisors are expected to assume three critical roles for their clients - client therapist, investment pragmatist and marketing strategist.
There has been a change in the behavior and demand pattern of corporate clients along with the growth and evolution of the industry over a period of time. Beginning with the financial meltdown in 2008, where investors lost heavily across multiple asset classes and when they valued 'return of capital' more important than 'return on capital'. This gave rise to demand for financial solutions that were simple, transparent and liquidity-oriented products instead of exotic and complex ones. Hence a growing demand for transparency and detailing.
Today financial advisors are expected to have greater clarity and transparency in relation to risk/reward ratio and performance.
The advisory based revenue model gaining prominence over the commission based revenue model for financial advising is a result of this change in behavior.
While creating a challenge for the financial advisors, this has also given an opportunity for the right financial advisory firm to reap the gains from the changed behavior.
Worldwide valuation and financial assessment firm Duff & Phelps is one such example that has sought to take advantage of it.
“It’s important for us to preserve our independence and to avoid and manage conflict of interest. We have an internal process, which is efficient and transparent with very formal engagement acceptance processes. In this world where confidentiality is critical, that is the front end of our internal processes (…) We also live in a very highly regulated world where transparency is crucial. So the way we conduct ourselves and manage our internal processes is something critical,” says Bartell from Duff & Phelps.
“High quality financial advisors, who have nothing to hide, should win 88% of the time – when investors use objective processes for selecting professionals who will influence or control their financial decisions,” says Jack Waymire, financial advisor and founder of investorwatchdog.com referring to a survey done by his organization.
Another change that is helping financial advisors help grow client’s wealth is sector specific specialization attained through team work.
“The team approach makes sense for ultra high-net-worth clients and the corporate, who often have complex financial needs that can involve international holdings, family businesses, complicated estate plans and illiquid assets,” says a recent advisor report from the independent research firm Morningstar.
Duff and Phelps strengthens this observation about the growing complexity of required expertise: “We assess value of almost every assets classes, from tangible assets up to the most complex intangible assets or financial instruments. To be more specific, we perform valuation - and related valuation advisory - of intellectual property like brands and names, technologies and software, but also complex financial instruments like CMBS and RMBS”, says Yann Magnan, Head of European Valuation business unit at Duff & Phelps.
Experts of the industry also believe that future of financial advising rests on a conglomeration of personal knowhow and technology. Be it large and global firms like Duff & Phelps and BNY, or individual financial advisors, integrating personal expertise with technology would certainly give the competitive edge to business.
"Advisors need to understand at every level the mix between technology and personal service," says Alois Pirker, director of research at the Aite Group.
