A funny thing is happening in financial services and it’s changing the nature of financial planning practices before our very eyes. Regulatory burdens, cost pressures, market dynamics and the changing competitive landscape – including the rise of fintech – are all conspiring to forge a new player in the market: the financial services entrepreneur. And it’s quickly becoming the new paradigm.
Once upon a -not-so-long-time-ago, a financial advisory business was a fairly straightforward proposition. An adviser would prospect for new clients, personally meet with them, listen to what the client wanted, present some recommendations and keep servicing the client over the ensuing years. Then, repeat the process again and again until the business generated sufficient clients and income. Typically, these businesses were one to one-and-a-half advisers in total, plus support staff.
But seemingly out of nowhere (although in reality from a studied consideration of changing market conditions) financial advisory entrepreneurs have sprouted. Joint ventures, strategic alliances, outsourcing solutions, omni-channel distribution, CRM platforms, back office efficiencies have become the trends du jour.
And more often than not technology is at the centre of these developments. Whether it be as one of the causes for re-thinking business strategy, an enabler, or the very raison d’etre. Practices are partnering with technology providers, entering joint ventures and white labelling tech solutions.
Practices are redefining who they are, what they do, who they do it for and how. For some, this has meant narrowing their focus on niche markets – offering high value services to markets they know well and understand. For others, they are re-imagining things in a more expansive way. Some are partnering with allied businesses. Some are offering traditional advisory services and bolstering them with robo-advice offerings, still others are adding debt advisory services. And the list goes on. Who’s to say who’s got it right and who’s got it wrong? Maybe there is room for all the models to exist?
But what is becoming clearer and clearer is that a self-employed adviser’s role is changing. No longer are your face-to-face advisory skills the main determinant of your business success. Your role is getting broader – more focused on business strategy and management and, excitingly, more entrepreneurial. Strategic decision making, business planning and management, IT management, marketing and human resources management all need to be a part of an adviser’s armoury. The actual face-to-face time with clients is decreasing and principals are increasingly taking on the chief executive role, engaging their whole suite of skills to drive the business forward. An entrepreneurial mindset is becoming a necessity. Of course, some principal advisers/business owners will decide that advice is what they do best and will instead hire in CEOs or general managers to take the business forward. Anything goes in the brave new advisory world.
Yes, there is uncertainty in financial services at the moment. But there is also great opportunity. Advice businesses of the future may well have advice teams, insurance-only teams, retirement teams, budgeting services, tech gurus, operational staff, strategic and marketing managers, call centre arrangements and project teams, or combinations of all these to take advantage of new opportunities. Services may be provided face-to-face, via tech platforms and call centres, from physical premises as well as websites and apps.
Advisers and business owners are in the perfect market maelstrom, forcing them to re-imagine the very business they are in. What an exciting time to be in financial services. How are you going to re-imagine your business? What entrepreneurial ideas are you going to implement to set your business up for success into the future?
Ian McDermott is principal lawyer with imac legal & compliance, a law firm and compliance consultancy specialising in small and medium-sized financial services businesses.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.
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