Financial planners and brokers are in dire need of advice. Our industry is going through unpresented changes (some would say attacks) which is a very real threat to current business models. Without giving it much thought you could list several ways your practice is being threatened. Regulatory burdens, fee challenges, proficiency requirements, product restrictions, compliance demands, lower cost competitors like robo-advisors and CRM 2 are common examples. With so many factors potentially affecting the way you run your business, what do you need to do to survive?
Innovation and adaptation are the key determinants of whether a financial planning practice will be able to survive. Those who are either unable or unwilling to explore alternatives will be left in the dust like the dinosaurs (or stockbrokers). So what is the first step to ensure your practice not only survives but thrives?
Curiously, those whose profession is based on providing advice are some of the worst at recognizing their own need for it, how to seek it and how to apply it. There are three main reasons why advisors are hesitant to seek advice.
Thinking you already have the answers:
Successful advisors need to have confidence in their own abilities to come across as experts. Our interaction with clients depends on this. If you have doubt in your abilities then you won’t persuade someone to trust you. While this characteristic is necessary for success, overconfidence can be self-destructive. Many advisors feel they don’t need to reach out for advice, or do it half-heartedly, believing they know what is best for their business.
Choosing the wrong advisers:
While some advisors can be applauded for seeking advice, often it’s not actually advice they seek. They seek like-minded advisers, failing to understand the expertise they need. What they are really seeking is a figurative pat-on-the-back from a like-minded colleague who brings peace of mind by reassuring their perspective.
After receiving advice, too often we fail to act on it. We tend to undervalue it by giving more weight to our own perspective. When the advice given breaks from our norm, we’re skeptical. It is only natural to have more confidence in what you think you know than the possibilities offered by others. The more successful a financial planning practice is, the more likely it will get trapped in a certain operating mindset that prioritizes efficiency of current procedures at the expense of innovation and exploring alternative solutions.
The basic issue confronting a business is the delicate balance between focusing on existing processes to ensure its current viability while simultaneously devoting time to exploring possibilities to ensure its future viability. Sadly, most advisors are too focused on running their practice based on what has worked for them before that they lose sight of where the industry is going and what is needed to position themselves for sustained success. It’s funny that they don’t recognize this truism while explaining to their own clients that previous performance is not indicative of future success.
How does an advisor know if they are running their practice to the best of their abilities in the most efficient manner making the best use of their time and resources? How does an advisor decide if they should go independent, if they should be licensed, if they should offer more products as solutions, if they should outsource unproductive responsibilities, if they should modify their book, if they should change their business model, and many other considerations? By proactively seeking advice.
As Charles Darwin said, it is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change. The firms that can best adapt to changing market conditions will be the ones to thrive in our new environment. To ensure that you’re aligning your practice with solutions that guarantees your survival it’s vital to seek advice and understand the industry landscape going forward. Seeking advice from a qualified industry expert, understanding it, and taking action on whatever decision you make will be essential for overcoming threats to your practice.