The Five Biggest Ways Your Practice Needs to Change

Bob Veres

Pundits and journalists make their living telling you that our profession is in a period of rapid evolutionary transition, and exhort you to be open to radical transformation.  “You’re going to have to adapt to the new realities,” they proclaim.  “The transitions are traumatic, and the old ways of working just won’t work anymore.”

“It’s time to make some changes.  Now.”

What you don’t hear in these messages are the specifics.  Telling you to brace for change, over and over again, isn’t exactly helping you make concrete plans.  With the constant demands on your time, it would be helpful to know: What are the new realities to which you must adapt?  Where are the transitions going to impact your practice?  What old ways are you going to have to abandon, and what new ones will you have to adopt? 

I’ve listed a number of genuine evolutionary trends below, and described where I think advisory firms will need to make changes.  Each of them is labeled according to where I believe they should fall on your priority list: Urgent, High Priority, Necessary Eventually, Not Necessary Any Time Soon.  

Preparing for the commoditization of investment advice and service – High priority

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Bob Veres
Inside Information

The robo-advisory firms are on everybody’s mind these days, but I think the term is about to become misleading.  LearnVest is perhaps the most aggressive recruiter of flesh-and-blood new hires in the financial services world these these days.  The company is bringing in dozens and (eventually) hundreds of the best college graduates and career changers to provide, not robo-advice, but what might be called “cyborg” advice – personal advisors highly leveraged by back-office technology which automatically handles rote chores like downloading, reconciliation, rebalancing and tax-loss harvesting.

This is where the profession will converge from both directions.  The other robo-advisory firms will discover that most prospective clients like to have a human in the loop, and will hire people to sit in front of their technology platforms and offer personalized services.  And advisors will need to converge to the same place by offloading these chores to computers and freeing up time to provide more and better personal service.  If I’m right, what we today call robo-advisors will become national investment advisor brands that provide many of the same services you do, only remotely, via Skype, email and text messaging, or the old-fashioned telephone.

How can you prepare?  Established advisory firms already have some terrific back office platforms that they can leverage, which actually offer more and better service than the robo systems.  I’m talking about do-it-all solutions like Adhesion Wealth Advisor Solutions, SEI  and Envestnet , automated platforms like Orion Advisor Services, or outsource providers like AllBackOffice Consulting.  You create the portfolios with and for clients, monitor them, and let the automated systems do the things that they do better than humans. 

One thing the automated systems do much better than humans is rebalancing.  How many flesh and blood advisors bravely rebalanced client portfolios back into equities in March 2009?  The robo advisors and automated back offices wouldn’t have blinked.

Preparing for increasing competition – Not necessary any time soon

I just said you should adopt the scale and efficiency of the robo-competition, but you don’t need to worry about them as competition – despite what you read elsewhere.  Similarly, you can dismiss breathless warnings about wirehouse efforts to provide more customized services, or that the independent financial planning market is getting noticeably more crowded. 

As it stands today, the independent advisory office is at the forefront of client service, well ahead of the brokerage firms and automated advice platforms.  Rather than worrying about disruptive forces, recognize that you are the disruptive force in this space that the bigger (and automated) firms will have to adapt. 

That doesn’t mean you should let your guard down or your service level deteriorate.  It means that you shouldn’t be looking over your shoulder as you run your race ahead of the pack.