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Advisors and Firms Must Now Adapt to Survive

April 27, 2017

Everyone is talking about the uncertainty around whether the Department of Labor’s proposed fiduciary rule will be delayed further due to the executive order from President Donald Trump, or if it will be implemented at all. What they are not talking about is how — in response to the fiduciary rule’s planned introduction and preparations for it — the business of financial advice has changed and what advisors need to focus on to grow their businesses.

Regardless of the motivation, the financial services industry is now well on its way to addressing important issues such as transparency and value. The desire for increased transparency and a concerted effort to provide a best interest standard for service will benefit advisors and consumers. Advisors will have the opportunity to use these issues to differentiate their offerings, which will in turn help them to grow their businesses. Consumers will benefit from a clearer understanding of the services they are receiving and an increased commitment to a higher service standard.

The firms and advisors that have embraced these trends will remain competitive, while those that are slower to adapt will be left behind. For example, those working in their client’s best interests are better positioned to offer clients more options and new service models that, in turn, will help to attract and retain clients through increased client loyalty and wallet share.

A few thought leaders and contributing authors of the book Exploring Advice shared their insights into how firms and advisors can succeed today given the current climate.

1. Always act in the client’s best interest it’s just good business

As a fiduciary, one is required to act in a client’s best interest. However, even if not held to a fiduciary standard, working in your client’s best interest just makes sense – it is just good business. An advisor needs to fully understand the client to act in their best interest, including the client’s overall financial circumstances, needs, risks and goals. In turn, clients can reap greater value from an advisor’s services in terms of potentially higher returns, less risk, more personalized service, and an overall superior experience. This breeds loyalty and client satisfaction that can bolster efforts to grow assets over the long term.

2. Use financial planning to increase revenue

Quality financial planning is the best way for an advisor to increase revenue. Frank McAleer, director of retirement solutions at Raymond James, told me that of his firm’s more than $600 billion assets under management, much of it has been consolidated from assets formerly held elsewhere due to the firm’s detailed financial planning process. For each financial plan the firm generates, advisors identify an average of $450,000 of assets a client has elsewhere. By providing the client with an interactive, quality financial plan, Raymond James advisors demonstrate that they are doing more than simply helping clients manage money. They illustrate how they help people manage their life decisions, be they about college for children, retirement planning or other short- and long-term financial goals.

3. Focus on the service model as a key differentiator

When it comes to winning and retaining business, McAleer emphasizes that all financial advisors will be financial planners, so the key differentiating factor will be service.

Jeff Magson, client experience officer at 1st Global, tells me it will be less about cost and more about the diversification of service and advice. He believes the best way to serve clients is by leading with a quality financial plan and then following up with an outstanding service model that allows the client to continuously revisit their goals and progress.

The Way Forward

Despite the uncertainty surrounding the proposed DOL rule, the business of financial advice has and will continue to change. The industry is moving toward a best interest standard around the quality of financial advice and service. Firms and their advisors will need to adapt to stay competitive in order to continue to grow.