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You Don’t Have to Turn Your Practice Upside Down

October 10, 2014

Bob Veres knows how tired you are of being told you’re doing everything wrong. Day in and day out, advisors hear they’ll soon be unemployed if they don’t address the financial, demographic and technological trends roiling their industry. So Veres, writing in Advisor Perspectives, tries to screen out the noise by listing, in order of priority, which changes he thinks financial-planning professionals really need to make and which are spurious. Out of 12 frequently heard recommendations, Veres says only two are actually urgent. He assigns high priority to three more. As for the other seven, advisors can take their time.

Both the suggestions Veres deems critical concern client service. First, he says, advisors must accept that they’ll soon be serving lots of women and lots of millennials. These cohorts like interactive financial planning — an advice relationship that resembles collaboration more than counseling. So smart advisors will learn to make client meetings “fun” and “enjoyable,” Veres says. The second matter of true urgency is succession planning. No conscientious advisor wants to leave loyal clients in the lurch when he or she stops working. And few advisors truly want to die at their desks. A succession plan ensures neither of those things will happen.

Meeting the robo-advisor challenge gets high priority from Veres. Advisors should get software to take care of chores like portfolio rebalancing, tax-loss harvesting and account reconciliation — which robots arguably do better than people do anyway. They should also automate every activity that’s “commoditized” and make sure all their tech platforms and programs work together with no hiccups. That will leave them plenty of time for the last high-priority item: prospecting for younger clients. Veres’ pro tip: Be flexible about asset minimums.

Putting your data on the cloud, hunting for a merger partner to scale up your business, going to retainer fees from commissions or AUM fees, outsourcing, and using incentive compensation for staff will all be “necessary eventually,” according to Veres. A practice with the resources to tackle some of these changes now, in his opinion, will be ahead of the competition in a few years. Getting on social media, by contrast — something often touted as the superhighway to new business — makes zero sense as a marketing strategy unless an advisor is actually good at using social media. If she’s not, she’s better off sticking to blogging or public speaking.

Perhaps most provocatively, Veres doesn’t think there’s any compelling need for independent advisors to worry about skyrocketing competition. The wirehouses and the robos are the ones that should be nervous, as he sees it, because indies are “the disruptive force” in the industry. “That doesn’t mean you should let your guard down or your service level deteriorate,” he writes. “It means that you shouldn’t be looking over your shoulder as you run your race ahead of the pack.”

By Joan Warner
  • To read the Advisor Perspectives article cited in this story, click here.