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5 Forces that Will Shape Financial Planning in 2019

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Written by: Brett Davidson | FPadvance

2018: The Year of Looking to the Future

Wow. What a year.

If you’re like me you’ve been head down from September to now. The last three and a half months after the summer break have been a sprint to the end of the year.

Here are five observations from 2018:

1. Succession or Sale is looming larger

To be honest, the average age of advisers has been 55 ever since I joined the industry in Australia in January 1991. I’m not sure how that works mathematically, but hey, maths was never really my strong suit.

Adviser owners who are looking to sell their businesses or create some form of succession, are on the rise. There are a number of consolidation groups in the marketplace, although for most Financial Planning businesses I work with, they’re not a great fit.

If you don’t want to sell to a consolidator, then you either have to find another Financial Planning business that is buying (and there are more and more of those out there), or create your own succession plan.

Good firms are doing exactly that. Sometimes the successors are the sons and daughters of the founders, but often they’re long-term internal candidates or candidates brought in from outside. It’s an exciting, scary and challenging journey to be sure.

I travelled to the US this year to learn more about the succession issue. Like most things, the US are a good five years or more ahead of us on that issue. I’ll be sharing plenty more on this topic in 2019.

The one important observation is this: you need to be planning for this ten years before you intend to sell or exit. Almost everyone has left it too late, but you can still give it a go. If all else fails you can still just sell.

2. The emergence of the second Generation CEO

We’re seeing the arrival of the second generation CEO. It may be the offspring of the founder owner, or their chosen internal successor.

I’m really impressed with the crop of people I’m seeing step into these roles. They are young and talented, and while they may be inexperienced in the new role, I believe they’re perfect for taking some great businesses on to achieve their full potential.

Watch this space as we do more to support this group of people in 2019.

If you are a second generation CEO, or you are looking to become one, then drop me a quick line. I’ll add you to our second generation CEO list to keep you posted on future developments.

3. Tech starts to become a threat (and an opportunity)

We’ve been hearing about the potential threat from technology for ages. This year I saw something that made me think that threat is starting to materialise.

United Income is a US tech play that impresses and concerns me. It may not be the company that leads to the demise of advisers, but it’s doing a lot more than simple robo investment advice. Check out their White Paper here (well worth a read).

In the US the big threat seems to be coming from what they call ‘cyborg advice’; a blend of robo and technology combined with access to a human advisor.

The threat is twofold:

Firstly, the offerings may provide a slicker front end to access advice than we, as human advisers, currently do. Let’s be honest, the engagement and fact-finding process in a traditional Financial Planning firm is a total pain in the neck for many clients. The cyborg firms are improving this with technology.

Secondly, the cyborg firms, big names like Schwab and Vanguard in the US, are offering careers in Financial Planning for younger new talent looking to join the industry. It’s too early to say if these new entrants will move on to your business in the future, or start their own breakaway businesses after a few years learning the ropes. However, for now lots of prospective talent is being soaked up by these players. This means they’re not making their way to independently owned boutique firms like yours.

Related: Is Financial Planning Facing an ‘Amazon Moment’?

4. Rise of Next Gen Planners

In 2017 I told my wife that the best thing I attended was the NextGen Planners Conference. Well, that was no different in 2018.

If you’re young, or young at heart, and willing to listen to new ideas, then this is one group I’d be joining (Full disclosure: I have no shares in Next Gen Planners. They don’t even send me a Christmas card). Click here for their website.

They also do some awesome podcast interviews. You can check out the one they did with me here.

Next Gen’s Adam and Rohan have created the most interesting group in Financial Planning. “Be good or be gone” is the motto. It reminds me of the IFP under Nick Cann 15 years ago, when I first arrived here in the UK. Small, enthusiastic, idealistic, and looking to change the world. I love it.

Another theme I picked up on in the US, which I think applies to us here in the UK, is our ability to attract, train and develop new talent to our still emerging profession.

As I alluded to in point 1. above, the ageing adviser issue is not new news. Most new talent that joins our profession is found in later life from other professions, it’s not developed out of school or University in the quantities we need.

Attractive firms that are good at developing their human capital are very rare. People development is one of our biggest failures, and I think it’s time we got better at it.

I know plenty of firms who are really trying to be better in this area. It’s such a great career. It would be good to show new graduates how great, and to have them join us.

5. Business skills are where it’s at

Financial Planners who own, or aspire to own, their businesses are finally recognising the one core skill that will determine their success: how well they can perform as business leaders and managers.

You can have as many selling skills as you like. You can have as many technical qualifications as you like. But if you can’t build and manage a team of people, you’ll make next to no impact on Financial planning in the future.

I’ve always thought of business management as the third leg to the Financial Planning stool. Business owners are recognising that, as their business management skills improve, so does their business. This also improves the development of their people, and their prospects for doing something amazing in Financial Planning. Leaving a legacy they can be proud of.

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