3 societal trends impacting your business—and what to do about them

How we communicate has changed drastically. Understanding how to capitalize on key trends can help your firm meaningfully engage today’s consumer.

Key Points

  • Societal changes are affecting the way we connect with each other and the world we live in. At Schwab's IMPACT® conference, Kim Lear, researcher and expert on emerging trends, referred to these shifts as "future factors" and explained what they mean for advisors.

For financial advisors, connecting with and understanding the client are fundamentally important. But the way people work and communicate has changed dramatically over time. In her presentation, Lear shared an example of how she recently experienced one such change firsthand. Visiting her sister's dorm in Wisconsin, Lear was admonished for failing to greet her sister's boyfriend, with whom she was "hanging out" via Skype as he studied in his New York dorm. While Lear saw only two people in the room, her sister saw three, thanks to a type of technologically empowered communication that wasn't available to previous generations. Understanding this evolution in how people connect with one another is crucial to attracting and retaining clients today and in the future. Lear identifies three social trends, which she terms "future factors," that are changing the way we connect with each other and with the world:

Lear identifies three social trends, which she terms "future factors," that are changing the way we connect with each other and with the world.

1. Unprecedented access—What happens when everyone has access to anything and everything all of the time.
2. The experience economy—How to create meaningful experiences as a competitive advantage.
3. Mainstream mindfulness—Understanding and leveraging a desire to be present in an age of distraction.

Understanding these future factors and how to capitalize on them can help advisors and their firms connect with and better serve their clients.

1. Unprecedented access: Everyone has access to anything and everything all of the time

While it is hard to believe, there's an emerging generation of clients and advisors who probably don't even remember a pre-Internet world. This generation uses "Dr. Google" to answer their healthcare questions and "Professor Google" to help them with homework. Essentially, they live in a world where, for the most part, they have access to all of the answers they need.

While this unprecedented access to information is predominantly positive, it can present some challenges for advisors.

People have access to so much—often conflicting—information that it creates skepticism, and this may show up in your interactions with them. How can you overcome this challenge?

  • Anticipate and prepare. Understand that many of these clients already will have done online research before they come to you, and they may have strong opinions. Be prepared for questions and potential pushback from them. If you look at this as an opportunity to listen and collaborate, you can begin to build that meaningful connection.
  • Become a trusted curator of information. Take the time to help clients understand the information they see, and be the resource that clarifies and simplifies everything coming at them.
  • Ask questions. Given this plethora of information, answers have become democratized. Asking the right questions is more important than ever, and as a financial advisor, you may be the only one posing them.

Option overload
The "paradox of choice" is a term Barry Schwartz coined to describe a phenomenon whereby too many choices actually lead to dissatisfaction with a final decision. For example, at the grocery store there are more than 100 different kinds of salad dressing. After agonizing over which one to buy, you choose the balsamic vinaigrette. But at home, eating your salad, you can't help thinking, "Maybe the basil-infused balsamic vinaigrette might have been a bit better." And your enjoyment of the salad is lost because you're preoccupied with all the choices you didn’t make. So how do you make sure your clients don’t experience this option-overload dissatisfaction?

  • Simplify. Clients don't need hundreds of options to choose from. Instead, consider presenting only a few choices. That way, they can fully consider each one and feel more satisfied when they make a decision.
  • Share your rationale. Take time to explain why you believe these are the best possible options so that once they make a decision, they are content with it.

The rise of the unconventional path
How people choose to lead their lives no longer fits into neat buckets of what they "should" do. You don't have to go to school, get a job, buy a house, and have kids, all in that order. Lear reported that in 1960, 59% of adults under 30 were married. Today, that number is just 20%.

In the workforce, the barrier to entry for entrepreneurship has never been lower. A number of companies address most of the pain points of entrepreneurship by offering co-working locations, communities, and services. If you are a "solopreneur" concerned about isolation or back-office support, you no longer need to worry. It's a good example of how today's access to information and a network of connections have given people more freedom to do what they really want with their careers. As a result, we're seeing many new and divergent paths to career satisfaction.

As an advisor, what does this mean for you?

  • Leverage this trend to recruit next-gen advisors. The rise of the unconventional path is a huge opportunity for this industry, because unlike other finance jobs, financial advisors are focused on working with people versus being transactional. Also, being a financial advisor is highly flexible and entrepreneurial: You're not confined to a cubicle or restricted to a conventional workweek.
  • Put together financial plans for life phases rather than stages. People no longer begin their careers with the intention of climbing the corporate ladder and conforming to a traditional path. Instead, they might be focused on short-term goals, such as taking a sabbatical to travel or launching a side business. Consider plans that allow for a periodic recalibration based on a client's changing priorities.
  • Don't make assumptions about gender roles. Men are becoming more active in the household and with their children. Lear reported that in 1965, fathers spent 6.5 hours per week on household work and childcare. By 2011, that number jumped to 17 hours per week. As a corollary to the shifting roles of fathers, mothers have become more career-minded and are making more financial decisions.

In short, expect the unconventional, and be prepared to help your clients and staff who choose that path.

2. Experience economy: Craving experience over material wealth

Economic history shows that we've gone from selling commodities to selling services to selling experiences. In the service economy, you give someone money to do something intangible on your behalf, while in the experience economy, people purchase something that will be a treasured memory.

Experience economy at a farmers market

To me, there is nothing more mind-numbing than the grocery store.
Compare that to the rising popularity of farmers markets, and note that they are the fastest-growing segment of our food economy.

Walt Disney World is an excellent example. People don't visit the theme park to buy something tangible, and they don't pay someone to go there on their behalf. People go to purchase life-long memories for their families. We also see this paradigm shift influencing advertising. iPhone ads used to show pictures of the phone, and now they show images of amazing experiences people capture with the phone. Other examples of the experience economy include the popularity of farmers markets, where shoppers go to enjoy the sights and smells, to touch the produce and engage with local farmers—a far different experience from the routine hassle of grocery shopping.

What does this mean for advisors? Assets can be managed on a transactional basis, but the advisory relationship offers something else. The most important question to ask yourself is, How would your clients characterize their experience in working for you? If you want to improve that experience, here are some good places to start:

  • Customize for your clients. There's nothing more tailored and personal than a human-to-human relationship. As an example, one advisor included a couple of vegan bars in the snack bowl for a meeting with a vegan client. That kind of customization shows an element of understanding and recognition of the values of your client.
  • Rethink your workspace. Meet with your clients in an environment with a white board or a round table, instead of across from them in a more formal position. Think about how you can use the whole office space to cultivate a positive client experience.
  • Have a more personal touch in email. Don't email your clients only when you need something from them. Ping them with good news about an investment, or share a restaurant recommendation.
  • Make a point of connecting with clients on topics outside of their finances. Identify moments, such as walking your client to the elevator, that lend themselves to lighter conversation topics. Use this time to chat about family, events, or hobbies.

Remember, your clients are looking for more than sound financial advice; they also want working with you to be a great experience.

3. Mainstream mindfulness: Focus on the here and now

Mindfulness, the mental state of focusing one's awareness on the present moment, is not just a millennial fad. Given that Americans spent $42 billion on mindfulness-related practices in 2009, it’s clear that mindfulness has gone mainstream, and it is a priority across all generations.

In her research, Lear asked people of various ages what they want out of retirement. A typical response from baby boomers was, "I just want to be present with my spouse, present with my children, focus on my health, spend more time in nature." Gen Xers wrestled with constant distraction—when they were with their families, they were thinking about work, and when they were at work, they were thinking of their families. They craved control over their attention and to be more present. Millennials shared how mentally exhausting it is to be constantly comparing and measuring up to the "highlights reel" their peers post in social media.

As financial advisors, it's important that you understand your clients' desire to be more connected and present in their daily lives. Personal finances are a hugely emotional topic, and when your clients are worried about money, they can't be present or open to the possibilities in the way they want to.

How can you help address this factor?

  • Look for ways to help your clients feel an element of ownership. Lear's research shows that people tend to feel out of control, that they don't have ownership over where their mind is and what it's paying attention to. And we are always more present when we feel like we have an element of ownership. So let your clients be more directly involved in the entire process of handling their finances to give them that sense of ownership.
  • Add a trusted healthcare expert to your referral network. According to Lear, health is the most important factor affecting happiness and retirement, especially for baby boomers. Offering clients access to a specialist who understands many of their healthcare-related concerns, including those associated with longevity, can be very impactful in the client relationship.

As the practice of mindfulness continues to gain momentum, it's likely that your clients will be thinking about it, reading about it, or already engaging in it.

Embracing the future

Transformational shifts are underway in our culture, and being successful requires embracing change, anticipating new dynamics in the marketplace, and adjusting how you run your firm. By understanding the future factors presented here, your firm can develop more effective methods of serving your clients.

More on this topic

Read the transcript to get a more in depth understanding of Kim Lear's "future factors."

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