Until the Middle Ages, warfare was primarily a battle of numbers. Those with the most men won the war. That changed as weaponry became more important than people in winning combat. The battle for market share in our industry is much the same.
Flying to Hawaii over the holidays, my wife and I had a marathon viewing session of "Game of Thrones." The show is a medieval fantasy in which multiple kingdoms vie for control. There are endless conflicts, and those with the strongest strategy and best weapons invariably win, even if their enemies are vastly larger in size. It got me thinking about how technological advancements and their usage have really been good predictors of the eventual victors in any battle.
In our industry there are various competitors of varying competence and resources trying to win the war for consumers. What is unusual is how quickly the weapons of competition are changing the landscape. The old ways of thinking about our industry will no longer work, but too many in our industry have not adapted their thinking:
1. You win the battle with better technology, not with more people. There have been many articles about the need for more financial planners and how the competition for talent will be ruthless. I'd like to suggest that in fact we have more than enough planners in a digitized world. If you want to build a successful firm, there needs to be a focus on how the same people do more rather than adding more people. It's an exponential world and that means every firm should be focused on enhancing the client experience, productivity and revenue per employee rather than increasing their workforce. The only way to expand productivity is by improving the way people work, and technology is the weaponry of our industry.
(More from Joe Duran: 4 ways to ensure you win with clients in 2016)
2. You win the battle by spending on capital improvements, not on wages. This is an arms war, not a people war. Modern warfare is now fought with unarmed drones and guided missiles. In our industry, if you don't invest heavily in technology, you will need more people and they will not be as productive or as well-equipped as the competition. Too many in our industry still view hiring people as the default strategy to solving challenges. That means linear, rather than exponential, capacity expansion, reduced flexibility and limited ability to contain operating costs. Technology investments are an asset and should be regarded as importantly as rent and wages in this modern age. In war and in business, those using the best strategy, systems and technology win.
3. You don't win by leading from the front, you have to guide from above. In almost every battle scene in the HBO show, the kings lead the charge into battle to prove their courage and inspire the troops. This strategy of “get in there, fix it and show people how it's done” is one many advisers still use in their firms today. While it's important to set a good example, it can't come at the cost of ensuring your team has the strategy and technology needed to compete effectively. Warfare today is more about thinking and less about doing. It's about adapting to the swift changes on the ground more than persisting doggedly on a predictable path. When there is so much change in the technology, leaders of any size firm must shift their role to incorporate more evaluation and strategic thinking.
THE WINNING STRATEGY
In our new world, I believe the war will be won by advisers that understand the power of becoming bionic; people powered by technology. Here are three specific steps which will give you the competitive edge:
1. Digitize the client experience. In order to stay relevant, advisers will need to create a digitized experience for their clients. One that is immensely engaging and makes them omnipresent and inextricable in their client's entire financial life.
2. Digitize the middle office functionality. The key to creating scale and improving productivity is to develop and use technology that streamlines client onboarding, scales client oversight and integrates working across multiple platforms.
3. Charge for what the clients truly value. Too many advisers charge for investing but give away planning, yet they add no alpha to the client in investing and plenty of gamma on the financial guidance they provide. As technology commoditizes investing, advisers will need to charge for where they really deliver value to clients in order to maintain client loyalty and profitability.
There might be no blood on the streets, but make no mistake we are in the midst of a high-stakes battle with major forces at play. The one person you don't want to be in any medieval battle is the guy on the boat asked to storm the fortress with a sword in your hand. Don't be that person.
Joe Duran is chief executive of United Capital. Follow him @DuranMoney.
