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How Would You Compete Against Your Own Firm? 5 Questions to Ask

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This past weekend, I was discussing competitive risk with an advisor. It centered around the idea that with the volatile markets wake-up call we’ve had over the last few weeks, clients may be looking at other options or providers. 

Everybody Is Growing…Are You?

If you follow the trade media, you may have seen that Vanguard announced that its virtual (or robo-) advisor, Personal Advisor Services, grew by more than $4 billion in assets in the just the second quarter of 2015. You also may have seen that Schwab’s Institutional Intelligent Portfolios has surpassed $2 billion since its launch in May. While I can’t or haven’t found statistics for some of the other robo-advisors out there, I was amazed at the heavy advertising I saw from firms like Betterment and Weatlhfront over the last few weeks. 

What we are seeing from both the newer upstarts and the traditional firms is a communications blitz aimed at panicky investors and investors who are not satisfied with their current relationships. While most advisors that I talk to say they are not losing any clients, I have to ask – where are all these new clients coming from? 

Look From the Outside In

During my weekend conversation, I asked the advisor, “If you were a competitor, how would you sell against your own firm?” To me, this is a great way to look at your offering, not for its strengths, but to find out where the holes are. By looking at your offering in the eyes of a competitor, you have the chance to plug the holes before someone else points them out. I would rather discuss a proactive change to my business than react to an issue brought up by someone else. 

Since I know this advisor and his businesses well, I suggested that we could work on this project together. (Frankly, this kind of exercise is fun for me, as long as the advisor doesn’t take the conversation too personally). Here are some of the questions we covered:

  1. What is the real value of your offering: investment or true financial planning?
    The more investment focused your firm is, the more your competition is going to focus on performance and price. We all know that at some point, the market will underperform. If you use passive (index or ETF) models, the tobos do the same and do it very well. The competition will always be waiting, looking to do a “second opinion” or some review service.
    The more your offering is tied to the markets, the more the competition will be able to blow you away.
  2. How transparent are your fees?
    Your competition will be going over your fee schedule, expense ratios, trading costs, platform charges, bond markups and any other fee you may charge (or may be charged by your custodian). They will be looking for anything that wasn’t verbally disclosed or brought to your clients’ attention in the last year.
    If the client doesn’t understand costs, the competition will poke holes in your offering, undermining your creditability for not explaining how you are compensated.
  3. How objective are you?
    The more you do in house, the more your competition will ask about your objectivity. When is the last time you fired yourself from a job? How can one firm in [insert your own town or city] be an expert at everything from individual planning to global investment management.
  4. What technology do you use and how can a client use it?
    No client really cares about what technology you use in your firm; they care about how they can use your technology to get their information. Your competition is going to offer aggregation and/or account look-up capabilities. They are going to offer video conferencing, webinars, and scheduling software, and be active in social media.
    In short, they are going to be available and provide access to data.
  5. How well do you know your clients?
    If your firm is a generalist, your competition is going to focus on your clients as part of a niche or segment. They are going to say, “We work exclusively with people like you, Mr./Ms. Client” or, “Our offering was built exactly for families who have similar obstacles.” They are going to speak the same language, read the same articles, and know your clients’ needs better than you do as a generalist.
    Your competition is a specialist. 

I could go on, but I think you get the idea. (In fact, if you think of others, why don’t you comment on this blog with some of your competitive tips?) 

This is the big question: what is your competition saying about you right now and how do you get in front of it? Use a team meeting; ask your most trusted regional marketing director or center of influence if you want some additional, unbiased results. 

Bottom line, you may not be thinking about the competition, but they are thinking about you.