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If you think building a big RIA firm is the sure path to success, the history of the rental car industry proves otherwise.
In the early 1960s, Robert Townsend was faced with a problem.
Townsend was the president of Avis rental cars, the then #2 rental car company. His problem? His company’s market share trailed far behind Hertz in the competitive car-rental field.
He was competing in a commoditized industry.
His rental cars weren’t any newer than Hertz’s cars were. He didn’t have more locations than Hertz did. Nor did he charge lower fees than Hertz did.
How could he possibly compete?
When pondering this quagmire with his then advertising agency, Townsend was asked what did make him different from Hertz.
His response, “We try harder.”
That moment of reflection turned into an iconic slogan that lasted more than 50 years, and in the years that followed it help Avis significantly close the market share gap with Hertz.
There are two lessons financial advisors should derive from this.
You don’t need to be the biggest, which is a good thing, as that will never happen. There will always be some firm with far more assets under management, more clients, and more resources than you can ever harness.
Just as with renting cars, the financial services industry has also become commoditized.
But there is something you can do. You can try harder.
You can provide better service. You can have a more responsive staff. You can be more proactive with your outreach to clients.
Biggest does not equate to best. Once you’re the biggest, it’s all too easy to relax and lose focus as to what got you there in the first place.
Like what Avis did, help your clients (and prospects) understand why you are better, not bigger.
The second lesson is to keep this same theme in mind when sourcing solution providers for your practice.
I help financial advisors transition their practices to the RIA model. That process involves deciding between a large and growing ecosystem of solution providers necessary to running a modern-day RIA practice.
Custodians, technology vendors, compliance consultants, back-office providers are just a few variables involved.
When evaluating those vendors, the biggest providers in their respective space naturally come to mind. They are often formidable with their value propositions and worthy of consideration. You might indeed use some.
But because they are the biggest does not automatically equate them to being the best solution for you.
Being the biggest doesn’t guarantee:
- they’ll be the most responsive to your needs.
- they’ll be flexible enough to implement new tools and resources as the marketplace changes.
- they’ll have a solution that fits your unique needs.
- anything, except that they’re the biggest.
Taco Bell is the largest Mexican restaurant chain in the United States. But the local Grand Hacienda here in my hometown of St Petersburg, FL, has far better food, service, and atmosphere.
Walmart is the largest grocery chain in the United States. But I’d rather visit the higher-priced Publix any day of the week. Its stores are nicer, the employees care more, and the overall experience is better.
Consider how prospective clients might view your own advisory offering. How can you position your firm so you have clients raving about you, just as much as I’m raving about the Grand Hacienda and Publix?
When considering vendors to use to support your practice, evaluate them based on who can provide you with the best solution based on your unique needs. Don’t be blinded by who is biggest.
Still not convinced the biggest can’t be beat at their own game? In the initial years that followed Avis’s introduction of its “We try harder” slogan, Hertz essentially stuck their nose up in defiance. They were too big to be bothered by such a smaller competitor.
In only a few years, Avis significantly closed the gap in market share. So much so, Hertz had to counter with their own ads directly attacking the “we try harder” slogan.
Biggest is not always best. The biggest eventually realize that as well.
(Hat tip to Chuck Failla with Sovereign Advisor Solutions for first bringing the Avis “We try harder” analogy to my attention.)
Brad Wales is the founder of Transition To RIA, a consulting firm uniquely focused on helping established financial advisors understand everything there is to know about WHY and HOW to transition their practice to the RIA model. Brad utilizes his nearly 20 years of industry experience, including direct RIA related roles in compliance, finance and business development to provide independent advice regarding how advisors can benefit from the advantages of the RIA model.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
