Advisors may have been feeling like they’re on winning teams lately, with the market up 7.5% over the past three months (as of February 28). But that has nothing to do with your skill; instead, it’s called being in the right industry at the right time.
The real competition is about clients, and today you’re playing against robots as well as other advisors. And the robots are looking like the Wisconsin Badgers in this year’s March Madness. Financial services research firm Cerulli Associates forecasts that the digital advice market will grow from $83 billion by year-end 2016 to roughly $385 billion by year-end 2021. Are you going to fight the so-called robos or join them? I believe that it’s vital for human advisors to view digital advice delivery as a friend, and not a foe that will eat their lunch.
So not only are you fighting the headwinds of tougher and confusing regulatory requirements and fee compression, you have digital advisors to contend with as well. You must still offer superior client service and run your businesses effectively while you market and grow your firms.
That’s a lot. But add one more thing: The investing public sees little differentiation among advisors in the marketplace today. They don’t understand what makes you special, so you have to show them. And the way to show them is to connect—you are more than a portfolio manager, which is the most commoditized aspect of your practice.
It’s up to you to beef up the ‘advice’ component of financial advice, then prove to your clients and prospects that you’ve got what they want. View digital investing delivery not as a force that will displace you but instead as a way to broaden your opportunity to deliver deeper levels of advice to a wider client base. Notice I said digital investing, not advice.
First, Define Your Value
Even as low-cost robos spread across the financial landscape, Cerulli notes that investors still value the role that advisors play in helping them understand the complexities of their finances. “Households’ perceived need for investment advice has increased since last year,” says Cerulli’s Scott Smith, who directs research on investor behavior. “With ongoing geopolitical turmoil, households continue to seek advice from a professional who can help them manage the turbulent times by focusing on goals and staying the course versus making panicked decisions that will have a negative impact on a portfolio.”
To best connect to clients in ways that highlight the value of advisory services requires developing a well-defined UVP—unique value proposition—that you can articulate. Your UVP describes how you can help solve your client’s problems, the services you provide and why you are the person who is most appropriate to handle their finances. It also sets up the cost-of-service conversation and positions your value.
So let’s talk about that. How are you different? Being the “trusted advisor” doesn’t cut it any more. You need to go deeper.
Second, Define How You Provide Services, Not Which Ones You Provide
The ‘What’ are the services you provide. They are a trap advisors frequently fall into. Everyone provides similar services. It’s the ‘How’ that makes the difference and speaks directly to the client.
Consider your target audience or the niche group with which you want to work. Write down what you are doing already or can do to better serve them. Think qualitatively—what difference does your approach make in their lives? How do your principles and philosophy come into play?
Next, write down your three favorite clients—ones who fit your ideal, are a pleasure to work with, have the right level of assets, maybe are a good referral source. Consider them one at a time. How have you helped them? Here’s what you need to include:
- The clients’ goals and objectives
- Their needs, concerns and challenges—what wakes them up at 3:00 AM?
- How they view you
- What problems you help them solve
- What benefits you provide
- Why the client came to you in the first place and how you helped them overcome challenges.
- Specifically how you help them
You now have three stories of how you’ve made someone’s life better, in ways a robo can’t. Each story should give you an idea about specific attributes of your practice, ones that make you unique. These are more compelling to share than the fact that you provide goals-based financial planning.
Talking about planning can feel like a foreign language to clients who may not have experienced it yet or who don’t understand why it matters, such as Millennials and even GenXers. But what is planning? Advice that is personal, and goes beyond the realm of the robo or any technology.
Third, Understand Technology’s True Role
The questions remain the same: “Tell me (financial advisor) what makes you different; why should I work with you?” No matter how personal your approach may be, technology still plays a critical role. According to a recent report from Roubini ThoughtLab, 62% of clients desire the latest technology and 51% want responsive, round-the-clock service. So technology should be part of your value proposition, while acknowledging that the human advisor still provides the secret sauce.