Are You Ready for the Next Generation of Super Advisory Firms?

I got a note from a client this morning sharing a special report on the future of advisory firms. The report shares several key trends that are creating the next generation of super advisory firms. My term, not the report’s. They define the term by having an organization with over 1 billion dollars of assets under management. These are highly successful, competitive advisory firms.

It’s 24 pages packed with all the reasons that super advisory firms are the future of advisory and investing services. It reminded me of many of the white papers I’ve read, and sometimes written, with clients. Well thought out, clear, and concise. Hard to argue with the facts, charts, and statistics.

As Mark Twain used to say, “Lies, damn lies and statistics.” This report could be the future of investing if future generations were dealing with the world of our fathers and grandfathers. Today’s super advisory firms should be working more with women. Women will be managing 80% of our wealth for future generations. These successful women are going to be future entrepreneurs, family and community leaders.

The next generation of investors will have different expectations of their wealth managers and financial advisors. Early indications show they will invest and spend their money differently. They expect a more personal relationship with their advisors. What that means is yet to be defined in a connected world.

Facebook and LinkedIn have had an incredible impact on what people expect from their advisors. Savvy investors are leveraging real time information to shape their investing decisions. Sounds great, until something turns out to be false. There is no redo in real time global investing available.

Super advisory firms believe their organizations can operate on paper thin margins to grow and scale. The problem is many of these firms struggle to meet increasing clients’ expectations. I believe skinny margins are not healthy for building super advisory firms.

Today’s technologies are still relatively primitive, contrary to what the hype cycle tells you. The other negative scenario for these firms could come when clients’ fees become tied to investment performance. It’s a slippery slope. I will go skiing in future blogs.

Super advisory firms are funding a new generation of FinTech applications to support their clients’ needs. I see the law of unintended consequences happening as FinTech organizations take their products directly to the consumer through apps on mobile devices. These new technologies are available for pennies on the dollar. Think “always on” investing capabilities anywhere in the world from your mobile device.

The rise of large technology businesses like Amazon, Apple, and IBM entering the financial services markets.  Many are seizing opportunities through unregulated capabilities that can decimate long term relationships with many traditional financial service organizations. For example, Blockchain and it’s many applications and capabilities. It could become death by a thousand paper cuts. Ouch!

Super advisory firms are creating brands. Brands are a critical element to building a successful long-term advisory firm. Many super advisory firms’ messaging misses the mark, if they shoot at all. The brand is your customer. If I took a way back machine and could share many of these organizations ads you would feel like we’ve gone back to the future. The stereotypes have changed, but the message is still the same. It focuses more on the firm than the options and opportunities it provides its clients.

Super advisory firms are going to have sophisticated value propositions. There are many reasons to have complicated value propositions. Technology enables these complicated value systems to work. The question I might ask is, if we can, should we? I believe many of the younger people and young at heart I know would chose another way of communicating and collaborating if there was easier one available. Last time we went to more sophisticated financial value propositions, the great depression happened.

Millennials trust financial services organizations even less than my hippy baby boomer friends. No disrespect intended, Tommy. All this wealth is going to be transferred over the next 20 years. I know that’s what super advisory services are betting the future on. What happens if the wealthy boomers don’t show up?

I work with many highly successful entrepreneurs. Many super-duper high net worth individuals. That’s a technical term, in case you wondered. They want to have an impact on the world they leave behind. Given a choice, many don’t want to leave it behind.

If you don’t believe me, look at the investments moving into health care, precision and holistic medicine, and life extending medical practices.  We want to live forever. Many entrepreneurs are seeking the fountain of youth and are willing to pay for it. As a friend quipped, “I have the money and I’m not afraid to use it.”

Super advisory service firms will have complicated organizational structures that allow for leveraging what they can do for clients. Let me understand this correctly, many wealth management clients feel underserved by their advisors. Complicated organizational structures will let the firm be more agile and anticipatory of future needs? Does that sound right to you?

Super advisory firms will leverage complicated organizational structures to make the client feel more connected and engaged personally. Just like voice mail was supposed to increase customer satisfaction and positive customer experiences. I’m not sure that worked out the way many executives expected.

I believe technology can help create stronger connection with clients. This being said, I believe there are several low tech, high engagement tools that can help create higher levels of client connection.

Super advisory firms face fierce competition both regionally and globally. How prepared is your organization to face these emerging challenges?

Next week I’ll share the critical 20% of the report that can help shape the future of our industry. See you next week!