Making the Most of a Strong Financial Market For 2016, combined annual revenues for the financial planning/investment advisory industry increased 8.1% to a total of $56 billion. According to the Investment Company Institute (ICI), US-registered investment companies managed a total of $19.2 trillion in assets at the end of 2016, an increase of 5.7% from 2015, driven by gains in the US stock market. During 2016, investment companies managed 22% of households’ financial assets, and this percentage has remained steady since 2013.

Realistically Optimistic Despite more employment, financial planners are cautious. Exchange-traded funds (ETFs) are the most commonly recommended investments, at 88%, followed closely by cash and cash equivalents at 85%, a 74% increase for 2016. Real estate is also strong. More than half of financial advisors (52%) are bullish on their 2017 outlook, but most of those (39%) are only somewhat optimistic. One-third are neutral and 16% pessimistic. There is uncertainty about inflation and changes to income and investment taxes. The number of North American HNWIs (High Net Wealth Individuals, at least $1 million in investable assets) increased 2% during 2015, to 4.8 million, with $16.6 trillion in investable wealth (a 2.3% increase), significantly less than 2014.

About the Advisors Among independent broker/dealers, advisors’ overall satisfaction with their firms decreased to its lowest level since 2013. The average independent broker/dealer firm had $63.6 million in total assets under management (an increase of 7%), annual gross production of $467,349 (an increase of 10%), 276 total clients and had been in business 21 years. According to J.D. Power & Associates’ 2017 U.S. Full-Service Investor Satisfaction Study, the top 5 firms were Charles Schwab, Fidelity Investments, Edward Jones, U.S. Bank and UBS Financial Services.

Marketing Challenges Stymie Growth Financial advisors are not relying on a strong stock market for a passive increase of their business. They are prioritizing new business by generating new leads (21.3%), encouraging referrals (30.4%), staying top of mind (12.2%) and branding (18.9%). Financial advisors’ top marketing challenges are: not knowing where to focus (24.7%), not knowing if it’s working (17.7%), not having enough time (13.9%), not wanting to do it (10.8%) and not being technical enough (8.9%). Although more than 92% of financial advisors say that referrals are their most successful form of marketing, nearly half spend no money on increasing referrals and almost a third spend $100 or less per month on it.

The Elusive Gen X Investor Fast-growing firms owe much of their success to their ability to attract Gen Xers. The top quartile of advisors in terms of growth added 10%–100% more AUM (Assets Under Management) from Gen Xers, compared to other quartiles. According to Wealth Management, advisors can attract more Gen X HNWIs by recruiting clients who are in early stages of wealth building, offering a suite of services, being flexible with their compensation model and offering clear and simple advice. Approximately 70% of Millennials think they will received better returns from a robo advisor than a human financial advisor. Distrust is pervasive; 84% of them put more trust in the objectivity of a digital advice platform than that of a human advisor.

Finding New Clients on Social Media The Putnam Investments Social Advisor Survey polled more than 1,000 financial advisors and found that 85% use social media for business. Of these, 80% said it had generated new clients. The median asset gain from social media was $1.9 million. LinkedIn was the most popular networking site, at 73%, but Facebook use is increasing fast, from 47% for 2015 to 54% for 2016. Facebook is used most frequently, an average of 23 times a month, compared to LinkedIn at 16 and Twitter at 21. Although only 73% of financial advisors networking on LinkedIn gained new clients, compared to 90% on Facebook and 87% on Twitter, LinkedIn delivered the largest average asset gain, at $5.3 million.

Advertising Strategies With retirement as the biggest financial goal of all generations, even Millennials, financial/investment advisors’ advertising strategies and messages should primarily focus helping individuals to reach this goal, and then pivot to offer other services. Since Generation X members are reaching their peak-income years, financial/investment advisors can offer a series of free seminars presenting the specific strategies Gen Xers can take to become HNWIs.   With referrals being the most successful marketing tactic for financial advisors, they should initiate an aggressive referral program that rewards the referring party, and promote this program wherever they advertise.

New Media Strategies Firms that offer a plethora of digital financial services, including robo advisor services, are those most likely to maximize the number of new Millennial clients. This is also an opportunity for forward-leaning firms to introduce artificial intelligence into their operations. Through the use of a blog and/or online articles, and shared with prospective and current clients, firms can both introduce new digital financial services as well as maintain a human contact with clients. Financial advisors should consider LinkedIn as their first choice of social media platforms, since networking their delivers a larger average asset gain from new clients. A company page should be constantly updated and content added to the Stories feature.