by Tony Vidler
The conventional thinking is that banks are bad for independently owned adviser businesses….”banks are rapacious profiteers who wish for nothing more than monopoly” seems to be the current mood amongst advisers.
The more I think about it though, the more I think they could well be the savior of the boutique planning or advice industry in years to come.
It is obvious to anyone that consumers are finding new ways to transact and purchase their financial solutions all by themselves…and it is also obvious that there is a proportion of the community that will in probability never really need highly technical financial advice. So we must conclude that there is a segment of the population that are never going to be customers of advice firms – either through a lack of need, or a lack of desire to engage with our business models.
They will be well served by the banks, who are absolutely geared up to deliver straightforward and relatively easy to implement products, with a modicum of (or perhaps zero) advice.
There is a proportion of todays bank customers though who aspire to be self-employed, or whose careers will become incredibly busy, or whose lives will become terribly complicated in years to come. Today’s consumer who sees no need for advice, or has relatively simple needs, will increasingly be cross-sold ever more products and services by the banks over time, as it is something banks excel at: utilizing excellent data mining together with superb direct marketing and strong follow up to move increasing amounts of product. The banks game after all is to get maximum share of wallet from their customers.
This combination of consumers changing needs over time, together with ever increasing complexity in their world and a relentless product push will result I believe in clients who will become prime prospects for personalized advice.
A cornerstone value that professional advisers deliver is the ability to remove complexity from clients lives. Banks help create complexity in clients lives over time. There will be an increasing proportion of their customers who will seek personalized advice to help manage that complexity.
Banks are not silly of course, and they have invested heavily in creating or purchasing advice divisions to manage this looming issue.
However, the rapidly increasing desire for complete transparency and objectivity in advice will present an insurmountable challenge to any institution whose primary objectives are consumer-wallet-share and controlled-distribution. Those goals cannot co-exist with a fiduciary duty to clients.
For highly qualified financial advisers who are able to deliver objective professional advice that is centered upon improving the client’s life, as opposed to an institutional agenda centered upon creating a retail outlet for product manufacturing, there will be increasing opportunity over time.
When we factor in the likelihood of many highly trained and well qualified institutional advisers looking to manage their own destiny over time, together with the need for transactional/product-based business to stripped out of high-value advice business models, then it would seem that the banks may well be doing independent advisers a favor in assisting to re-shape the industry.
It is highly likely that the institutions will manage very capably the transactional/product focused customers, elminating increasing proportions of the tyre-kickers and time wasters for the full advice businesses. They will introduce ever-increasing complexity into consumers lives that is likely to trigger a rise in the need for impartial advice in segments of the market. They will struggle to resolve the institutional control requirements with the market forces of transparency, objectivity and independence. They will also be a part of the solution to many boutiques succession concerns.
On balance, it seems likely that institutions might just be the catalyst that helps create more of the highly valued, full impartial advice, boutique planning firms.
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