Kieron McRae offers some tips for surviving in the financial services jungle, and assesses the future of the industry against a rapidly-changing landscape.
Phil Knight (Nike Founder and author of Shoedog) said “business is war without bullets”. Great quote, but who goes to war unarmed? Not a great start when sustainability and survival are key!
A little short of 50 years ago, a vacuum-cleaner salesman named Loren Dunton gathered 12 like-minded people together in a Chicago hotel to create the Society for Financial Counselling and, in so doing, launched the profession of financial planning. And while the business looks a lot different from what it did at conception, the underlying premise articulated by Dunton remains: people needed financial planners “because of the growing complexity of their financial lives”. The difference is that today the complexity is a jungle, and the need and means to cut through it is even greater.
When you talk to financial advisers about the future of the industry, their answers divide them into two groups: those that hope their business will survive and those that want their business to be sustainable. (There’s a third group — there always is — and they are the ones who think survival and sustainability are the same.)
Sustainability is more complex than survival, which relies on perseverance, habit, and a fair amount of luck. A sustainable business, however, relies on all that and a lot more. It is more than simply installing motion-sensitive LED lighting in the office, solar water-panels, and insisting the company cars are hybrid vehicles. It’s more than simply having one or two impact investment funds to offer clients. And it is certainly about not coming up with an endless variety of products that supposedly will create great returns at unacceptable risk levels. At its most simple level, the days of stating, “this is the product that we will offer,” will have to be replaced by the question: “what do our customers need and want?”
But perhaps, it actually needs to start with ourselves first? Because, if we are not clear on what our own purpose is and what we want, how will we ever be in a position to understand what our customers want?
So, when was the last time you looked at your purpose? When was the last time you pondered the sustainability question?
There is no shortage of great “models” that provide a framework and reference to help you. Simon Sinek’s “Start with your Why” approach from his famous TED Talk that has had millions and millions of views and is the staple diet of just about everybody out there purporting to be a management consultant of some type.
Or, what about Jim Collins’s “HedgeHog concept from his bestseller “Good to Great” – “what can you be the best at in world?”, “what are you deeply passionate about?” and “what drives your economic engine?”
And then there is Steven Covey with one of his 7 habits being “start with the end in mind”
Whichever model you chose to use, there is nothing more powerful than a clear, agreed and shared purpose to create certainty in your people, your organisation and your clients.
And while it is true that the sustainable businesses will survive, it is not the case that the business that simply survives will be sustainable. The growth in investor numbers means that there will always be a place for some financial advisers to survive, eking out an existence on the fringes.
The next 50 years
In order to survive the next 50 years, the industry will need to find smarter, faster, and sustainable methods to assist their clients deal with this complexity. Significantly, over the last ten years, financial planners started to refer to themselves as wealth managers. A report that appeared in the journal Accounting Today, stated that the “distinction between financial planning and wealth management” comes down to that the former delivers to the client a regular but static report on their finances, whereas the latter engages in a “process of financial planning applied consistently on an on-going basis throughout the various life cycles and circumstances clients encounter”.
These clients’ “encounters” are becoming increasingly more complex and more demanding as they embrace the multi-channel digital experience with its promise of immediate value delivery and support.
If innovation is about thinking differently about the financial services paradigm, then we can agree that innovation leads to effectivity, which is about efficiency and customisation. In other words, doing it differently. Effectivity without innovation is simply efficiency, and that won’t be sustainable in the future.
Sustainability, therefore, is the result of combining innovation with effectivity to achieve desired long-term, on-going results. By this I mean being the difference you want to see in the industry.
The future of advisers is therefore not to provide expert information — Google does that — but to be a partner that understands their unique situation, helping them 24/7, and in real time.
Despite the rapidly changing financial services landscape, the one quality vital to its sustainability is trust. Stephen Covey’s seminal work, The SPEED of Trust is the definitive text on trust in relation to behavioural finance and financial planning. He says trust rests on four principles: integrity, intent, capability, and results.
If you do for the client what you said you’d do, acting in the client’s best interest, have the expertise to understand and solve the client’s problems, and create a good outcome for the client, then you will have their trust. And a sustainable business.