The Financial Advisory World Has Changed…For Good.
Practice Management & Strategic Issues

The Financial Advisory World Has Changed...For Good.

June 5, 2020

by Tony Vidler  CFP logo   CLU logo  ChFC logo 

Well there is no way now that we can think the financial advisory world will stay the same.  It has been signalling dramatic change for a few years, but the changes are now escalating at an even more dramatic rate than anyone could have predicted. It feels like it is all getting tipped upside down rapidly.

That’s bad, right?

I don’t think so…in fact I think it is good for financial advisers.

A year or so ago we were thinking that there were three camps; robo-offerings, institutional offerings, and the good guys.  (Pick which side I’m on).  The concept of advisers being able to deliver robo-type offerings seemed too hard, too expensive and too far away.  Institutions had all the money, political clout and consumer trust.  Individual (and especially independent) advisers had a great offer, but consumers hadn’t caught up with the power and value of personalised planning delivered by folk who HAD to stand behind their advice and wear full responsibility for it.

Well…haven’t things changed?

The level of trust by consumers in institutional offerings has plummeted…in fact many institutions are abandoning entire segments of financial services completely.  In a blindingly fast period of time small advice firms have had to figure out how to embrace technology and incorporate it into personalised advice just to survive…and it is a short step from there to incorporating technology based advice and product solutions as part of a standard advisory practice.  They hybrid-advice business has been born.

It is a great thing.  It is better than “good”.

Many of the business building methods financial advisory firms had successfully employed to build their businesses have actually been struggling to generate the traffic and interest in the marketplace for years.

What a lot of professionals didn’t figure out is why those methods struggled.

Here’s a snapshot of some of the big changes for professional services firms, and how they inter-connect, that have been developing for years…well before the last year of institutional melt-downs, public enquiries into business practices, latest rounds of regulatory reform, pandemics or the international civic rebellion which looks to finally put basic human rights for all at the forefront.

Market noise & confusion

  • The average consumer now receives over 3,000 advertising or marketing messages per day.
  • There are virtually no positive media messages regarding financial services or financial advice – the mainstram media generally has been utterly irresponsible in focussing upon only the bad and has engendered much of the mistrust.  Forgive me for not having a lot of sympathy in the the mainstream media’s current struggles then…but “fake news” and negative headlines which have dominated the media consumption of consumers is now being seeriously questioned by those same consumers.  Yay.
  • There is a lack of trust in the financial services industry, yet particularly on the back of the performance of the advisory sector in recent months, the level of trust at individual level between consumers and their advisers has probably never been better.  The correlation of this is a massive decrease in trust of the biggest brands, and I do not see personal trust in institutions recovering for a very long time indeed.

Compliance & Regulation

  • Delivering advice is, and will become even more so, time consuming & increasingly expensive.  The rules just keep coming…and each new rule or vague/non-defined “outcome” criteria comes at a distinct implementation cost for advisory firms.
  • Advisers carry personal liability, and are working in an era of the “victim culture”.  That is, someone should always be held to blame for any outcome the consumer did not desire.  We now know for a fact what cynics such as myself suspected: institutions will not protect individual advisers. The individual is expendable in institution-land.
  • Evidence of the advice & the service delivered is critical to survival.  Evidence mattes more than expertise actually, and that is a significant shift in focus for a professional practice.  More resources are required to create the evidential systems than the expertise of the advisers themselves.

Digital communications

  • Email still rules, and is preferred communications – but it is 1-to-1 that matters now. Mass marketing is dying, if not already dead.
  • The rise of mobile data use & consumption changes content preferences and effective channel selection for engaging with the market
  • Websites & blogs configured for SEO results means “experts” are everywhere…and they are 0.4 seconds away from any consumer.  Literally.  The smartphone together with effective SEO manipulation strategies and professional presence saturation means that everyone looks like an expert on first search.  Standing out from the pack is tougher than ever using conventional methods.

Speed & service expectations

  • Increased technology access, use and speed accelerates consumer service expectations. We will probably never be able to keep up with consumers speed expectations, so it is a mistake to try.
  • Increased consumer protection, complaints and redress facilities drive up expectations and service overheads
  • Impersonal service is no longer perceived as service at all.

Social networking

  • Social Media is the preferred consumer channels for brand engagement, and often, brand research. It is the preferred channel for communication with their communities.  It is the primary source of “news”.
  • Social media is driving the demand for ever-increasing high quality content, and killer content is king now
  • Peer-to-Peer recommendations and content sharing is now a critical support function for any referral or word-of-mouth marketing strategies.  Advertising is not trusted, though has its use for creating brand awareness.  Recommendations are trusted.

Engagement marketing

  • Customers will decide who they use on the basis of relevant & appropriate engagement
  • Quality content combined with efficient & timely delivery drives up engagement levels
  • Building trust over time before physically meeting prospects is now the norm

Value of advice

  • The global trend to separate advice from product leads advice businesses to find new service models
  • The rise of pure product delivery business models is coming at the expense of traditional distribution models.  Robo’s have been doing simple product sales better than advisers could…but that will change.
  • Value is constantly challenged and questioned by even long-standing and loyal clients.  Value is dynamic, and largely subjective.

Is it little wonder that many advisers feel like the world they know is coming to an end?

The world they have known IS coming to an end..and that is good. In fact I think it is great.

The opportunity to invest in personal relationships and be valued on the strength of what advisers bring to those relationships has never been better.  The ability to incorporate simple solutions and deliver them via technology-based services by an advisory practice has never been better….and that means the ability to separate simple advice requirements into simple and affordable solutions is now with the advisory domain, leaving them free to deliver the high value bespoke work where it is needed and can be priced appropriately.

So while many of the business building methods financial advisory firms have historically successfully employed to build their businesses have been struggling to deliver the good news is that the world has been tipped on its head.

I really feel that good times are coming for professional advisers who are focussed upon their clients and who are willing to build a hybrid practice which emulates robo-offerings where it makes sense to do so, and who separate their brand from institutional offerings.

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