Trends are so obvious that they insidiously weave themselves into our lives until they emerge as a constant. Whether it be the fattening of Americans or the pollution of the air we breathe, trends left unattended often have a negative impact. The opposite is also true.
Trend forecasting is not my profession, but I am privy to both empirical data from our research projects and the perceptions and attitudes that emerge while speaking, training, and coaching. Industry changes in the past two years have produced a number of subtle trends that I believe will shape your world as an advisor, for good or bad:
- Transition to Fees
The world of transactions has dumbed itself down to commodity selling. No one today wants their financial affairs reduced to buying commodities. The challenge goes beyond fees. Converting your practice from transactions to fees can still result in a one-dimensional relationship with your clients. You must provide a full range of valued financial solutions. Your clients must feel they are getting legitimate and valued services for the fees they pay.
The trend toward fees will emerge as a make-or-break issue for many financial professionals over the next few years. The question you must always answer is: “Fees for what?”
- Emphasis on Teams
It is difficult to address the multidimensional aspects of an affluent clientele by working solo. There is too much ground to cover, knowledge to acquire and areas of expertise to master.
The challenge is in forming your team the right way, with the right people and for the right reasons. Easier said than done. Dysfunctional teams typically lead to nasty divorces. If the industry is not careful, team divorces might emerge as another trend.
- Commitment to Planning
Research by NFO Worldwide tells us that 23 percent of millionaire households currently use a certified financial planner, up from 14 percent in 2000. The trend is clear: Millionaires no longer want to make isolated investment decisions.
There are myriads of asset allocation software packages that can help initiate a financial planning process. Yet truly effective financial planning revolves around fully understanding planning as a process. Every 21st-century financial practice will eventually include a certified financial planner as part of its team. Some astute prospectors have begun mining for gold simply by reviewing old financial plans that were either improperly developed or not adequately monitored. Your planning process will increasingly become a critical core competency of your practice.
- Increased Productivity
The 21st century is segmenting financial professionals into “haves” and “have-nots.” Advisors who are productive and work diligently to exceed their clients' expectations will become a magnet for wealth in their community. They will earn more than they ever imagined.
Those who fail to raise their game never again will be able to produce a six-figure lifestyle. Advisors these days can't just find a way to hang on. Everyone will go up or down based on the productivity choices they make.
- Emphasis on Wealth Management
Wealth management, done properly, is based on the concept of comprehensive, integrated specialization. The entire scope of financial acquisition, protection, growth and disbursement must be managed as an integrated whole. Your wealth management team's knowledge of each issue must be total and up-to-date with such variables as tax and market changes. You must have a personal relationship with each client, and every action of every team member must speak louder than any talk about “wealth management.” Your elite corps of advisors is seasoned in this process, having executed it for several years.
Although “wealth management” is becoming the trendiest label in the industry, its practice requires more than parroting slogans. Legitimate wealth management teams will continue to be magnets for serious money relationships, regardless of their label. Pretenders simply spouting wealth management rhetoric will cause the public to view it as merely another marketing ploy. If you're going to adopt the wealth management label, now is the time to walk the talk.
- Demand for Competence
The competency trend actually arises from all the others. Justifying fees, creating highly efficient teams, initiating an effective planning process, improving productivity and providing comprehensive, integrated specialization all raise the bar and redefine the meaning of being a 21st-century financial professional.
Trends rarely provide any great surprises. Those who are aware of the obvious and who are willing to adjust their attitudes and activity accordingly view trends as a welcome companion in their processes.
Your mission for 2003, if you choose to accept it, is to capitalize on these trends, even when you have to stretch beyond your comfort zone. Yogi Berra said that when we come to a fork in the road, we should take it. After a thoughtful look at these six trends, we should not have to ask, “Which one?”
Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients.