While ‘doing business today’ begin to ‘build your business’ for tomorrow

As I travel around the country speaking at major industry conferences I often like to open with a question, “who do you think will be your biggest competitor over the next 5 to 10 years”? The answers always tend to be one of the major wire house or independent firms. I then click the button on my presentation to display the iconic Apple logo and say “for the traditional financial advisor whose primary role is baseline security selection and portfolio management this will become your greatest competitor”. Technology will do to our industry what it has already done to the legal and tax profession; create sophisticated software and websites to provide base-level accounting and legal documents. Our only solution is to dramatically upgrade in three critical areas: our approach, our insights and our clientele.

1. Our Approach Today: Throughout most of history our industry has taught us to be “some things, to all people”. Think about your first day of training, regardless of the firm or your length of service, and complete this phrase that was delivered by someone in that training department, “I guarantee you will succeed in this business if you open a lot of ________________”? Virtually all of us would put the word “accounts” in that blank space. Simultaneously many of us were told that we should always have an “opinion”, and a couple of investment ideas we could share with virtually anyone. Over time this approach created a business comprised of way too many clients and attempted to manage way too many individual and unrelated investments.

We must move from being “some things to all people”, to becoming “all things to some people”. This requires moving from an investment centric strategy to a holistic wealth management strategy and from attempting to manage a battalion… to a platoon. It requires continually moving up-market where the level of financial complexity requires highly personalized and sophisticated advice, impossible to replicate with an iPhone app or a call center in Bangalore India.

2. Our Insights Today: For years I have said we are a, “left-brain industry talking to a right-brain client”. We tend to be more comfortable with data, charts and graphs, information and statistics, than with concepts like analogy, metaphor and story: more comfortable with the world of “what and how” rather than “why”. This is not an “either/or proposition”…but an “and proposition”. We use our left-brain to inform and justify our decisions, but more often than not we use our right brain to actually make those decisions. Our industry teaches us to overwhelm the client with data, statistics and justification rather than to illuminate and enlighten through the strategic use of analogy, metaphor and story.

Understanding investment strategy and tactics will always be important but it is no longer sufficient. One of my favorite questions is to ask, “Which is more challenging, managing investments or the clients that come attached to them”? It is actually not the clients but their emotions, which often get in the way of structuring and/or sustaining a coherent and sustained long-term strategy. We must therefore get much better at helping keep clients “buckled in” by expanding our base of knowledge well beyond “investment strategy and tactics” and into the realm of providing “philosophical framework, historical context and psychological insights “. We must become in effect “context providers”.

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3. Our Clientele: The more complex the client’s financial life, the more they need a sophisticated and comprehensive approach with nuanced and insightful advice and context. This is why so many top advisers and firms are trying to move upmarket, extend their platforms and expand their knowledge.

Allow technology to play to its strengths (providing a simple, standardized and low-cost approach) while you play to your strengths (providing a comprehensive, sophisticated and highly personalized approach).

These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the date of this presentation and are subject to change based on subsequent developments.