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Ron Carson: 9 Challenges Advisors Must Tackle

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Adaptability will be the most important part of investment advisor growth going forward, Ron Carson said during his keynote address at the Financial Planning Association conference in Chicago on Thursday.

“We call it AQ, the adaptability quotient, and it’s never been more important to adapt to new technology and new business ideas to succeed,” said Carson, the founder and CEO of Carson Group. He says the bigger goal is to “break out of conventional wisdom and embrace the unknown.”

Today’s profession has never had so many opportunities, nor so many distractions, he said. These nine factor will affect the future of the business, Carson said:

  • Stealth fee compression: The marketplace is looking for a high-value provider, but small financial planners can’t compete with the Vanguards of the world, he explained. Further, fees have come down one basis point over past 10 years, buts costs of services other than portfolio management have tripled.
  • Consolidation of firms: Both large and small firms will be affected. He advised that firms should “not do deals” if the cultures don’t mesh. “Culture eats strategy for lunch,” he said.
  • Decreasing advisor headcount: There are about 300,000 financial advisors today, he said. According to a Fidelity study, 111,000 will retire in the next 7 to 10 years, “and given a market event, that will accelerate more quickly,” Carson said. Meanwhile, only 5% of all advisors are under 30 years old. This becomes more problematic as the high-net-worth population is expected to increase.
  • Friction between clients and institutions: Sixty-five percent of people don’t trust financial institutions.
  • Aging population of advisors: Carson suggested that firms should have advisory councils that can add input on succession and future planning.
  • Technology integration: Advisors must make the complex simple.
  • Ever-increasing consumer expectations: The next generation of clients will pay a fee but want value for it “without a doubt.” They can get their own information on the internet.
  • Possibility of a down market: Advisors will have to do a risk budget and figure out how clients will hit their goals in case of a market downturn.
  • Headwinds in net new asset growth: People are retiring and taking out funds, which means those have to be replenished with new clients.

Carson also noted that brand trust is key for advisors. In fact, in a study that asked, if Facebook, Google, or Amazon offered wealth management, would you be a client?

“Without knowing the cost, 51% of the people said yes, and 81% of those under 40 years old said yes,” Carson said, predicting Amazon would offer wealth management in the future.

He also said advisors have to be transparent in showing how much value they have added to their clients’ lives.

Carson Group uses a tech timeline to show decisions made along the way, and when they meet with clients, they provide it “to show our planning alpha,” Carson said.

He wrapped up by saying that factors weighing down advisors included technology (the time and money suck), vendors, the whirlwind of running a business and advisor apathy.

The engines that drove a business were client acquisition, partnerships, integrated technology and the all-important adaptability quotient.

With transference of wealth and technology disruption coming in near future, Carson said, “if you’re not growing, you’re going to die in this environment.”

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