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Future Advisor: Once You Realize That You Need to Change, How Are You Going to Get There?


Future Advisor: Once You Realize That You Need to Change, How Are You Going to Get There?

Innovation Part 2

My friend Graham Hawkins wrote this article about his childhood: Potato Farming. His stories about his father who was a potato farmer and how the ability to adapt to changing conditions in the market and in technology were key to prosperity.

This is exactly what is required of all independent financial advisory firms today and in the next 5 to 10 years. Technology and your buyers are changing rapidly and you need to as well. The ability to adapt your business model is going to be the most critical success factor in your quest to maintain profitability and the ability to truly serve your clients in their best interests going forward. Additionally, this mindset of innovation and adaptation to technology will be absolutely foundational in your ability to recruit and retain talent at all levels of your organization and in all departments.

In my first article in this series, The Big Boys are Coming, I asked the following questions:

  1. How are my most desirable customers going to be affected by the change that I now understand is occurring in my industry? (Big boys + technology disruption)
  2. What services will they be looking for from their advisors in 5/10 years and how can I meet their future needs/wants today?
  3. What process will I/my firm need to create to allow for the ‘whitespace’ necessary to imagine, develop, prototype and deliver the next business model success for my space?

In this post, based on some excellent feedback from readers like you, I’m going to address each of those questions in turn.

  1. If you buy into my premise that the business model is changing, then you first need to look at your ideal clients. The chances are that over the next 5 to 10 years you will remain profitable with the standard AUM model. However, it’s almost guaranteed that your profit margins will be compromised by technology and increased competition from the large wire house firms. The big firms have the big resources the big offices and all of the ambiance. Unless you’re going be a high-level boutique firm, and there are some of you out there, you eventually will have a harder and harder time attracting and converting individual clients of high net worth. At the same time, you’re going to face fee pressure from the bottom of your client base from the Robo firms squeezing your profit percentage from their side as well. To maintain your profitability in the current fee model you have to examine what messaging is being absorbed by your clients on a persistent basis. It doesn’t take much time watching your average television program to see messages from discount brokers and Robo advising firms that are actively and savagely attacking your value proposition. The only way to maintain an increased growth curve, given this repetitive onslaught, is to innovate.
  2. The services that your customer the future is going to expect are going to be driven by the experiences they had as they became professionals and achieved more success. What were observing within the millennial generation, is that they are far more interested in access to advice than they are interested in paying a consistent percentage of their investment performance to an advisor. What this means, to sum it all up, is that you really need to move to some version of a subscription model for financial advising. Whether or not you go straight subscription and offer no custodial role or you do a hybrid model which includes custodial I don’t see any way that you build and maintain increased growth and profitability without some form of a subscription plan. You might be developing the new hybrid business model for independent financial advisory firms and reaping the rewards of that innovation along the way.
  3. The big one: once you realize that you need to change, what is an effective process to get you there. What I talk about white space, I am really challenging you as a leader to get to a quiet place where you can let your non-task oriented brain function better. Creativity requires less noise in most cases. There are two types of white space that you can explore.

The first type of white space is what I will call organic whitespace. This involves you, without any outside assistance, or distraction, getting away from it all for a significant time interval in examining the following:

  • What is the status of my organization’s business model and my level of leadership at this very moment?
  • What needs to change to be ready and able to incorporate, integrate and excel at a new business model. The big question at this point is this: How does the current make up of your team support innovation, or, do you need to look at a different way of recruiting, interviewing, hiring, on boarding and coaching your team as you transition to the new business model.
  • What is a realistic timeline to accomplish these changes and how will I engage my team to ensure that we all combine our efforts effectively towards the goal. While it is critical that you immediately start thinking and changing at the executive level right now, there is no requirement to execute on the change immediately within your current organization. I would estimate at least six months to a year if you are following the organic model and three months to six months if you’re involving a consultant at a minimum.

The second type of white space you can use as an independent financial advisor is purchased. This is where you hire a consultant to, in essence, turbocharge your transformation from one model to another.

Please note, do not hire a consultant that is going to bring in a canned or stock program to achieve success. If you go down this route make sure that you engage a consultant that will support you creating a new business model that is unique and powered by your own passion and culture within your organization. Their entire focus should be on helping your organization create the new model.

In addition to my firm, I can recommend several other firms of integrity and purpose that will be more than effective in helping you not only transform but do so ahead of the vast majority of your competitors.

You can do this on your own…you have the profits and the ability to reap the benefits of change. The big question is, will you? My clients partner with me to help them with the process of innovation while enjoying the profitability of predictable referral based sales systems. I am always open to a conversation…how else can we innovate?

If this was of value I ask that you share it with any and all independent financial advisors you are in a relationship with as the opportunity has a short window and geographic location has no impact. I need your help.

I am always open to a conversation about innovation with the independent financial advisor space, or, other industries in the SMB space.

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