Robo-advisers, direct marketing, 24/7 online transaction facilities, product kiosks and over the counter solutions to shoppers at supermarkets…these are all choices for financial products today. Naturally these new methods of providing financial solutions challenge traditional incumbent business models, and many advisers hold the view that professional financial advice is essential for all consumers.
Is that true though?
For example: The 23 year old just entering the workforce who is bright and disciplined, carefully saving a percentage of each pay, and with no dependents or liabilities to speak of…..they have fairly simple financial needs, right? I know we can make a good argument that getting a comprehensive financial plan at that stage can potentially help set them up for life and probably early retirement, but do they need it? Surely that is a “want” rather than a “need”?
I have found myself increasingly using the following diagram when working with many advisers trying to figure out how to adapt their practices to todays different consumer needs and choices. There is a clear area of opportunity for advisers, and clearly there are areas where advisers will struggle to differentiate, let alone compete.
This is the typical consumers financial advice, or financial products, needs over time:
While it is not absolute it can be viewed as generally correct for the majority of consumers. Early in life their needs are few and relatively simple. Later in life their needs are relatively few (compared to prior working years), and more often than not the ongoing advice is extremely limited in scope or fairly simple.
The mainstream advice area is naturally where life gets more complex for consumers, as it is where research, process, knowledge, information, strategy and choice come together to create value in customers lives. Of course this is where most advisers find themselves operating with most of their existing clients today – those who are still in the complex years and who are also (usually) time poor. The adviser is valued by those clients generally.
At the extremes it really is becoming the domain of the direct transactors or commoditised product providers. Lowest possible costs together with highest possible convenience factors together with simple product structure equals an easy and instant “just add boiling water” solution. Advisers would generally be foolish to try and compete in that space.
Most advice businesses will come to recognise this (if they haven’t already) and will direct their marketing efforts at gathering more of the consumers who are currently living lives of complexity. Those same consumers are being bombarded with over 3,000 advertising messages per day, are already time poor, and have rapidly improving privacy screens and filters. They are going to be tough to get through to aren’t they?
The greatest opportunity to acquire new customers lies in the times of disruption in consumers lives.
The times of transition from simplicity to complexity, or vice versa. At the front end where simple needs are becoming more complex there is the opportunity to gain clients who will grow. At the other end of the scale there is the opportunity to provide more transactional services perhaps, but still high value. Both types of business can grow a firm rapidly, and quite probably more easily than competing in the crowded middle market.
The consumers in transition are the ones who want advice most. They are the ones who will place a higher value on the professionals who can simplify the complexity. They are the area of greatest opportunity in my view.
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