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To grow an advisory practice, identifying advisory megatrends lets you understand where practices, the industry and your clients are headed.
Surfing these waves will position your firm for growth.
Ignoring them will put both firm’s growth and foundation in peril.
Here are five advisory megatrends you must pay attention to build a thriving, sustainable firm and keep pace with the industry currents.
1. Movement from investment management- to planning-led practices
Practices have largely kept existing clients happy by beefing up on credentials like the CFP® and adding basic planning services and wealth dashboards. At the same time, they have tried to maintain margins in AUM-based fees.
The transition from investing to planning has challenged advisors, diverted focus and lowered profits.
Existing clients – those with minimal planning needs – may even reject paying ongoing fees for planning services not used.
New entrants such as the planning-centric advisors found in the XYPN network are calling on financial planning as a reason to engage an advisor. These millennial planners, however, struggle with a different problem:
How can we offer ongoing value and create $2,000 to $5,000 of annual fees per client when a one-time $2,500 financial plan might organize the average younger client for the foreseeable future?
And there are only so many unattached $2+ million households who may have ongoing and complex financial planning needs.
Established firms historically have been strong at wrapping numbers around investments such as:
- how much money a couple needs to retire and
- how to not run out of money in retirement.
But as the focus of the planner’s value proposition turns to goals, fulfillment and peace of mind, many planners struggle with how to articulate those benefits to prospects and clients alike.
The outcome: More work, lower margins and an inability to articulate this new value proposition will choke-off growth of individual firms as well as stagnate the overall market for planning services.
2. A lack of training in executive skills
Excelling as a position coach or as an offensive or defensive coordinator in the National Football League does not predict that you can be a head coach. The NFL’s roughly 25% annual turnover in head coaches shows you the flaw in their head-coach development process.
Being a financial practice CEO demands a different skillset from managing a book of 100 clients.
An advisor successfully managing a book typically goes after multiple credentials and devotes most of their week to ensure that existing clients are happy along with adding a client or so per quarter, largely through networking and referrals. Their training focuses on being a better advisor.
In contrast, a successful financial practice CEO will:
- lead his or her advisors,
- build a team,
- contemplate acquisitions,
- set the overall strategy for the next five years,
- build the technology stack,
- create a marketing plan (and hire someone else to implement it),
- strategically cultivate COIs, and
-
occasionally get involved in major client issues or pitches.
While maintaining client relationships, managing investments and engaging in financial planning are all second nature to experienced advisors, they are largely inessential skills when it comes to building a team, driving a strategy and leading a growth-oriented organization.
Thus, as successful advisors build their own practice or create a partnership/ensemble of practices, they are largely untrained in the skills they need to run the practice as a business.
This deficiency hampers their ability to execute a sustainable growth strategy.
3. Getting clients requires inbound marketing and new technologies
When survey after survey reveals that the most popular customer relationship management (CRM) system in use by advisors is…
Outlook!
“Houston, we have a problem.”
A CRM system is a relational database to segment and manage contacts with the goal of offering better service, helping to identify and track sales opportunities, and managing clients in a comprehensive way.
Outlook is an email and calendaring program and in no way should be confused with any flavor of marketing or client management system.
Firms that lack a basic fluency in front-office (marketing and sales) technologies face challenges in today’s digital/social-first economy.
When I discuss websites with the average advisor, they say that they have heard of inbound marketing, but admit they are only vaguely familiar with it and may dismiss it offhand.
They believe that high-net worth clients don’t use the Internet to find advisors.
Perhaps the success of firms like Ken Fisher’s that use digital marketing is less common in the advisory space. But other industries view inbound marketing as a core business competency.
Start-ups in other industries, for example, seek out a “growth hacker” as one of their first hires. These marketers largely use technologies to help to funnel Internet traffic to their website and nurture leads to become clients.
Advisors who aren’t found online and have no scalable way of nurturing and educating prospects and clients alike will be at a significant disadvantage over these next 10 years.
Mastery of marketing technology has become table stakes to marketing proficiency, and the financial industry is behind the curve in this area.
4. Aging demographics of established advisors
Surveys show the average age of a financial advisor is well over 50 and nearly one third of all advisors are projected to retire in the next 10 years.
While I believe these projections are overstated and many of these advisors will hang in there an extra five to 10 years, the current demographics of established advisors will disrupt growth.
Why?
Let’s flash forward a few years and suppose the average advisor is approaching 60. Why does that hinder practice and thus industry growth?
This typically advisor is more likely to be:
- Seeing retirement on the horizon and enjoying the fruits of their decades of building a practice, thus taking maximum cash out rather than reinvesting in future practice growth;
- Working with an ageing book, which means fewer new clients adds and even AUM decline;
- Spending less time at the office, potentially spending minimal time with smaller clients, especially those bottom 80% of their relationships;
- Heavily focused on their succession plan. Or, alternatively, they have no known succession plan and current and potential clients are beginning to wonder what happens to their money if the “unfortunate thing happens to their advisor”; and
- Less likely to adapt to industry and technology trends, perhaps even less likely to invest in new training and their credentialing core to better serve their clients.
While some advisors may excel in their 60s and beyond with existing relationships, a simple example of how this trend hurts growth is a solo practitioner now in his 60s who hired me to build his website in 2012.
Seven years later the dated website cried out for a refresh, but the advisor had no interest in the project. All his energy was going into maintaining his current book.
A dated website is a big turnoff to new relationships, because the average prospect checks out his potential advisor online before reaching out to set-up an initial call.
5. The traditional marketing plan is obsolete
While every industry has its common marketing playbook, the traditional advisory marketing plan is largely obsolete – a drag on both individual practice growth and on expanding the overall market for advisory services.
Traditional marketing has its roots in cold calling, referrals, newsletters and perhaps COI and seminar marketing. Each of those tactics will become either ineffective or problematic for a host of reasons that I don’t have time to discuss in this article.
From the perspective of marketing messaging, compliance has always been both a perceived and real issue.
As marketing moves online and becomes increasingly focused on creating unique content, advisors have struggled with producing marketing copy that garners the attention and interest of their ideal prospects.
You have seen how the industry is shifting from an investment-led to a planning-led approach.
Most advisors, though, struggle with how to articulate the long-term benefit of a financial or retirement plan, both verbally and within their various marketing channels.
From a marketing-talent-recruitment perspective, the industry has largely relied on career advisors or those with practice-management backgrounds.
Neither, however, is conducive to independent thinking and bringing marketing best practices from other industries to advisory firms in this time of need for fresh ideas.
Within these common pitfalls lies an amazing opportunity for those practice leaders who choose to take a truly independent path to create the business of their dreams!
Those firms that recognize and capitalize on these advisory megatrends will create vibrant, thriving practices and become the leaders of tomorrow.
Bob Hanson is a fractional marketer and author of Marketing Power for Financial Advisors. Get his checklist, Nine Questions Advisors Must Ask Before They Hire a Marketing Agency, Fractional or Full-Time Marketer, click here.
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