Practice Management

Why financial advisers need to rethink their strategies now

May 24, 2017 @ 6:02 pm

By Joni Youngwirth

We tend to think our industry is unique. We lament that we have so much going on, with the Department of Labor's fiduciary rule, aging boomer advisers and a lack of young advisers — not to mention female and multicultural advisers — coming into the industry. On top of that, our clients are getting older and starting to draw down their assets.

News flash: Most, if not all, industries are experiencing rapid changes just like ours. They're seeing increased government oversight, the challenges of adapting to an increasingly tech-oriented world, dramatic shifts in customer needs and expectations, and increased competitive pressures. You may see such significant change as an obstacle you have to deal with. But I think you should see it as an opportunity to reassess your business strategy.

(More: 8 points financial advisers need to make with clients before the next correction)


First, I think we need to review what a strategy is. Historically, strategy has meant doing what everyone else was doing, only doing it cheaper. Then along came Michael Porter, a Harvard Business School professor. He argued that strategy goes way beyond being the most efficient and even beyond being the best. Instead, it means doing something no one else can do, at least not easily.


Arguably, not many. Their strategy often looks something like this: "At XYZ Firm, we truly care about our clients." First, that's a significant diss to the rest of the industry. And for sure, it's not actually a strategy. A strategy defines your customer and explains what new or unique service you offer that customer. It answers these questions: What do you do in your firm that no one else can do? What unique value propositions are baked into your firm that others can't easily copy? What do you do that's new, original, builds on what you already do and actually takes advantage of problems and challenges emerging in the industry?

As our industry evolves, I believe advisers will need to become more specialized. The days of being all things to all people are on their way out. If your modus operandi is to take on any prospect, regardless of fit, you are going to need some new ideas.

(More: Shrinking talent pool puts strain on advisory firms)

What might your new strategy look like? Here are a few examples:

• XYZ Firm coordinates and facilitates an annual in-person meeting, including at least the CPA and estate attorney, for all clients with investable assets of at least $20 million and a net worth of $40 million.

• XYZ Firm provides 24/7 technology-based reviews with human advisers for clients with at least $250,000 in investable assets.

• XYZ Firm provides every 401(k) client with personal coaching on holistic retirement planning — both the financial and emotional aspects critical to a successful retirement.

These examples are based on a specific niche. It would be difficult to offer all of the above profitably while simultaneously being "the best" in the industry. Strategy involves taking calculated risks. Consultants consistently stress the importance of niche.

Advisers consistently ignore this advice more than they heed it.

Gurus suggest considering your business from a customer perspective. Which best describes you? Are you:

• All things to all people?

• Serving select needs of many customers?

• Serving broad needs of select customers?

• Serving broad needs of many customers but in a narrowly defined market, such as a specific company or professionals in a specific industry (e.g., neurosurgeons)?

(More: Top financial advisers' tips for landing seven-figure clients)


Ask yourself the following questions, and be honest in your answers:

• Do you already have a clear, easily articulated strategy?

• Do you want a strategy, or are you indifferent to such management concepts?

• Do you need a strategy? Unless you are a boomer adviser planning to retire in the next few years, firms likely won't survive in the long term without a strategy.

• Do you have so many resources — time, money, energy — that this topic is irrelevant to you?

Times are changing. As the industry's numbers decline, the future can be bright for those who seize the opportunity to define their personal and professional future and creatively embrace something new and unique — something others have not conceived or implemented yet. Alignment with industry trends before they become entrenched is key. One thing to be sure of: Doing nothing is tantamount to failed strategy.

(More: Managing client expectations is a big part of an adviser's job)

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.


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