The Dodo Bird, the Tasmanian Tiger, the Woolly Mammoth – the one thing these animals have in common is that their inability to adapt, evolve, or weather change in their environment ultimately resulted in their extinction. Translate this to today’s financial services industry. The Solo Advisor appears to be on the precipice of extinction. With the rise and rapid growth of advisor teams, the legacy presence of wirehouses, and the dynamic shifts occurring through mergers and acquisitions, the place of the Solo Advisor within the financial services industry may seem questionable at best and non-existent at worst. This doesn’t have to be the case. The ability of the Solo Advisor to understand the competitive landscape, redefine their role in the industry, and evolve their strategies to insure relevance with their clients in the future may just be the key to assuring their survival.
There is an old adage that states ‘what got you to where you are will not get you to where you want to go’. Nothing could be more true when looking at today’s Solo Advisor. Statistics released this year from Tiburon Strategic Advisors and published in Financial Planning show the variances that exist today within each financial industry sector. Between 2008 and 2015, the number of independent broker-dealers dropped 6.8%. Compare this to a 2.8% drop in wirehouses and the simultaneous strong growth of the RIA and dually registered advisor at 1.8% and 9% and the full story begins to unfold as to which types advisors are the ones now poised for success.
Throughout my career, I’ve worked with many successful, Solo Advisors who, through diligent management of their book of business, being selective with clientele, and providing exceptional service and results, have not only netted a comfortable six-figure income, but have enjoyed the luxuries that come with entrepreneurship such as free time to spend with family and the ability to pursue personal interests. The danger for these Solo Advisors comes when comfort becomes complacency and results in a lack of strategic thinking to address competitive threats which can ultimately erode, if not completely wipe-out, the hard work that got them to where they are. Without a serious evaluation of their business plan and practices, Solo Advisors who were once producing $700,0000 may find themselves producing $350,000 and wondering what on earth happened.
So what is the Solo Advisor to do? The first area of weakness that needs attention is the client relationship itself. If you are a Solo Advisor there is a good chance you have received a phone call from what you thought was a solid client that started with, ‘You know I think you’re great, but I am moving my accounts to a different GROUP.’ A call such as this probably has put you on the defensive. You believe your business models are great, your clients think your great, and they love your sales assistant. It has to be about them and not you. This can’t be your thinking. It’s time to take a hard look at the services you are supplying and how you have positioned yourself competitively with your customers. Are you optimally managing day-to-day operations and your client assets? Have you taken advantage of new technologies which enable more efficient management of client portfolios? Do you have platforms in place to provide your customers transparent and efficient access to their account information in real-time? Are you employing the most current communications innovations to continually market your business – not just to prospects but to current clients? If the answer to any of these questions is ‘No’, then your firm is vulnerable to the competitive threats and strategic advantages presented by multi-advisor firms and wirehouses.
Advisor teams have the ability to scale at a better rate, cover more markets, invest in social media strategies, and develop marketing channels which will lead to more business. Take for instance the recent news coming from UBS. The firm is investing heavily in technology platform tools including collaborating on an advisor desktop with Broadridge Financial Solutions which will be rolled out over the next 3 years. The company also released plans to have 2/3 of its U.S. advisors work on teams over that same time frame through leveraging productivity and specialization. The UBS strategy of dynamic platform development to assist advisor growth is not unique and similar to those already unveiled or employed at other firms including Morgan Stanley and Raymond James.
Another strategic advantage of advisor teams is their ability to deliver a high-level service model that takes advantage of both their human and technological capital to meet the needs of their clients. This not the ‘virtual team’ concept that has been much touted in recent media but a true collaborative environment based on every professional being vested in the company’s success and being compensated for the growth or failure of the practice. Everyone in an Advisor Team environment wears the same jersey, so to speak, and through this affiliation share a mutual focus on and vision for the practice. Ultimately, this is the very best way to gain exponential growth and client retention.
Another competitive area that must be considered by the Solo Advisor, and one common theme we are seeing in our discussions with advisors now, is the need for succession planning. Succession planning today has little, if not nothing, to do with the retirement of the advisor and everything to do with the client and their concerns. Clients are comfortable with and trust their advisor. It is only natural for them to wonder what will happen and who will manage their money if something should happen to that trusted advisor. This presents the greatest weakness to the Solo advisor. Advisor Teams provide clients comfort in knowing that their financial planning, portfolio management, estate planning, and other services will continue in the way they are accustomed, regardless of who is responsible for it.
Make no mistake. While the competitive disadvantages faced by the Solo Advisor are hefty and may seem an insurmountable obstacle, all hope is not lost. Survival from extinction for the Individual Advisor comes down to understanding the risks of staying on their own and the competitive threats that exist in the market today. It requires thinking strategically and planning ahead so that their business does not become obsolete based on the future needs of clients. It demands differentiating yourself and focusing on best business practices. In the end, it means entering the jungle of financial services and doing what it takes to evolve and adapt to insure a place for the Solo Advisor in the years to come. So, let’s enter the wild and figure out how to make that happen in Part Two of this series, Welcome to The Jungle: The Solo Advisor and Survival of the Fittest.