Editor’s note: This is an excerpt from The Growth Mindset: Leadership Makes a Difference in Wealth Management, to be published in 2017 by Wiley.
A tsunami of change is headed toward the financial-industry shore, promising to swallow those unprepared for challenge and disruption. Indeed, disruption can resemble a tsunami—a series of waves with enormous destructive power. Leaders must meet these challenges with appropriate responses from positions of strength.
Whatever you do, don’t let yourself or your firm become a casualty by resting on past success and becoming complacent. The appropriate response to this sea change is adapting quickly and never losing the power of curiosity and purpose. This is the foundation of a growth mindset.
Industry Challenges and Disruption
A leader’s greatest motivation is a new challenge; a leader’s greatest liability is insecurity. Whether he or she faces challenges head-on with a healthy sense of confidence and optimism or retreats with pessimism and doubt ultimately determines success or failure.
Now is a time in the financial industry unlike I have ever seen, primarily marked by commoditization of our services by disruptive technologies. The challenges at hand are real. An army of competitive new players is luring our existing clients with an arsenal of choice. Organizations that lack the right leadership assets—that is, those with leaders who cannot face the following challenges—will not be able to compete effectively:
- The war for top talent
- New technologies that promise to make current systems obsolete
- Passive versus active money management
- Integrated holistic offerings
- Fee compression and reduced margins
- Escalating regulatory landscape
- Sophisticated, value-minded investors
- Increased competition and difficulty being distinctive
That new players are moving into our industry should surprise no one. With nearly $17 trillion in investment assets in play and a compelling annual growth rate of 8.4 percent, wealth management is one of the most attractive sectors within financial services, especially in the high-net-worth (HNW) space, which accounts for $57 trillion globally.
Even less surprising is that technology yet again is unleashing change in our industry. Our smart, sophisticated clients always are looking to take advantage of new technology and new players.
Many people in our space see technology firms’ interest in wealth management as a direct threat to the traditional investment advisory model—and rightly so. If new competitors can deliver better service at a competitive cost, then why should clients stay with us? We’d better have an answer. Finding the right solution may mean we need to redefine our value proposition and accept that we’ll have to innovate and reinvest in the client experience if we are going to remain competitive. We need to use predictive analytics to enhance client experience, financial planning, and advice tools; and offer a truly integrated wealth management experience. The HNW market wants value, and I believe most will pay for this customized value.
The Leadership Response
Leaders in the wealth management sector who embrace a growth mindset will continue to out-compete the competition. To do this, you may need to change your business model by automating processes or outsourcing time-consuming tasks such as investment management. Leveraging new technologies in your business creates more scale and efficiency, leaving you more time to build and deepen relationships. You may need to re-evaluate your relationship with time. Are you spending it on high-payoff activities? Your response to the speed of change needs to be a commitment to a life of learning. Our leadership skills—and specifically our people skills—are going to be paramount because we are, above all else, in the people business. We are people who work with people. We need to stay on top of the technological innovations that are changing our industry, but more importantly, we need to continue to leverage skills such as emotional intelligence, creative thinking, and advanced judgment. For many advisors, it’s about updating their skill sets, adapting to new realities, and being brilliant in the fundamentals.
Over the course of my 34 years in the business, I have worked with about 42,000 advisors and managers in all the channels—wirehouses, registered investment advisors, independent broker–dealers, and bank trusts. I have worked with firms of 86,000 employees and firms of fewer than 10 employees; teams of three people and teams of dozens; managers and advisors from North America, Europe, the Middle East, Australia, and Asia. Each of these interactions had unique aspects—different structures, platforms, products, and services—deployed across different cultures.
One thing was consistent. One thing created business results. One thing made all the difference in people’s lives: leadership. Strong firms need leaders that have mastered the fundamentals. I feel strongly about the fundamentals because as we know, if you can’t get the fundamentals right, what’s the point of trying to be cute with a new tool, service, or technology? Based on my experience, the advisor, manager, or frankly any entrepreneur who gets the fundamentals right drastically increases the odds of success. You may be surprised to learn that a large percentage miss the opportunities because they overlook fundamental leadership. I’ll just give you a few examples. Fundamental #1: Commitment—doing what you said you were going to do. Fundamental #2: Emotional intelligence—being self-aware, making people feel special, recognizing people daily, being a great listener, respecting different points of view, asking for feedback, etc. The leadership challenge for all of us is to achieve sustainable results by creating the right vision, the appropriate strategy, and the perseverance to execute. As leaders in the wealth-management space, your true measure of adding value to any organization is your ability to do three things well:
- attract the right people who are the right fit for the organization;
- be a great coach to develop that talent (and yes, even the best advisors will welcome coaching from a skilled and competent leader);
- and create the right environment to retain the best people and allow them to flourish.
This is simple, but not easy. Let’s not confuse the two.
The Advisor’s Response
There is no shortage of ideas about growing your business, but there is a large gap between knowing and doing. For some the gap is as wide as the Grand Canyon. Most people know what they need to do to grow the practice, and those who don’t have myriad ideas about any part of the process. Unfortunately, knowing doesn’t always result in doing. Reaching out to other advisors and picking their brains could go a long way. Those who are motivated find a way; they always are looking for ways to improve. Therefore, my guess is if you are reading this, you are successful or a rising star. As the legendary psychiatrist and Holocaust-survivor Viktor Frankl said, “Those who have a ‘why’ to live, can bear with almost any ‘how.’” Purpose is primary, that’s why it’s the first step in my proprietary advisor growth model. With all these changes and a technological revolution, the advice business is still a growth business.
Growth does not happen by chance. It cannot be assumed and no business should ever be put on autopilot. Growth is a conscious decision to continually look for ways to improve and develop. That’s what a growth mindset thinks about and is passionate about. Those advisors who plateau and become complacent operate with a very different attitude.
The best advisors are relentless about putting clients first because they realize the only way to differentiate is by building genuine relationships with clients, offering valued advice, providing excellent service, and helping clients reach their goals. They have a process, a vision of who they want to be and where they want to take their businesses. They are true wealth managers who are client-centric, run their businesses like chief executive officers, and follow a holistic consultative approach to engaging and servicing clients. They are more likely to be on a team that is highly efficient, effective, and disciplined in its practice of delivering world-class service and valued advice. They understand that the business is no longer about one product over another or transactional versus fee-based models; it is about being relevant and offering valued advice to clients who are willing to pay for the services offered.
It is these advisors who will continue to evolve and dominate the lion’s share of the HNW market.
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Rick Capozzi is president of Capozzi Advisory Group, LLC, a global boutique consulting and training firm. He earned a BS in economics from Southern Connecticut State University. Contact him at [email protected].
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