Mark Tibergien

“The desire to maintain the status quo is more powerful than the momentum to change it.”  That bit of wisdom came from Simon Sinek, who I had the opportunity to interview at BNY Mellon Pershing’s 2019 INSITE conference.

Sinek challenged the 2,000 attendees to throw away many of the commonly-accepted (yet outdated) management philosophies made popular in the 1980s in favor of a new goal — to build more compelling businesses. People should be excited to get to work, in a place where they feel safe and fulfilled by what they do.

What not to do? Force rankings of employees based on the goal of mustering out the weakest links; measure against key performance indicators that focus on performance vs. competitors instead of measuring our own momentum; driving strategies designed to beat the competition instead of plans to satisfy the customer.

Drawing from his new book The Infinite Game — scheduled to be released Oct. 15, 2019 — Sinek noted that leaders with a “finite” mindset tend to think in terms of fixed rules, agreed upon objectives, and known players (think baseball, hockey or soccer). Leaders with an “infinite” mindset realize there are both known and unknown players and that the goal is not to beat your opponent, but to stay in the game as long as possible. That mindset should exist among all business leaders because it allows us to learn, to be resilient and to anticipate change.

“For finite thinkers, a competitor is somebody you want to beat,” he said.  “For infinite thinkers, a worthy rival is another player in the game whose very existence reveals your weaknesses.”  When you understand the difference, he added, you will also appreciate what steps you must take to create a business to last.

As an example, he cited how Microsoft was obsessed with beating Apple. Meanwhile, Apple was driven by the desire to help teachers teach and students learn. Consequently, Microsoft did not compete well in areas like MP3 players, mobile phones and tablets, while Apple as a mission-driven business became more enduring and more relevant to the education and retail market. Ironically, their focus was not on becoming larger than others, but as a result, they have become one of the world’s most valuable businesses.

Using other metaphors about how we make decisions, Sinek reminded us of the Vietnam War which, for those of us who were around at the time, recall how it appeared to be an endless struggle that created great stress at home as dissenters outnumbered supporters.

Amazingly, the United States lost 58,000 troops in the war while North Vietnam lost more than three million people.  Yet Vietnam prevailed and the United States gave up its effort to stop the Communist dominos from falling in Southeast Asia.  Sinek observed that the Viet Cong would have fought to the last man because they were fighting for their independence, while the United States lost its will to win because its mission had become unclear and support at home had waned.

Financial services has become equally obsessed with domination, said Sinek — pay the most to  the highest performers, and show the greatest growth, regardless of the culture being fostered. That juxtaposition of key drivers in businesses led by finite and infinite thinkers is stark, yet likely familiar to many advisors who consider how they can influence the lives of their clients, rather than how they can grow assets or beat the competition.

Sinek also observed how disruptors have changed so many traditional businesses who appeared blind-sided by the competition. He asked: “Why did a computer company invent iTunes and not a company in the music industry? Why did Amazon build the e-Reader (Kindle) and not a company in the publishing industry? How come Netflix wasn’t built by the movie industry but by a professional marketer and mail order executive?”

He related that the CEO of Blockbuster, the largest retail video distribution company at the time, noted what Netflix was doing to access the movie-loving public with a subscription model, but his board did not support the shift to subscriptions that he proposed. Why? Because his board felt it would disrupt a key revenue source — 12% of Blockbuster’s revenues came from late fees.

What Does This Mean?

All of these examples can’t help but make you think: What will become of our business?

Are you resilient and open to change or will you preserve the status quo because that is all you know?  Perhaps you can wait it out until you retire from the business and leave the problem to someone else.  But, think about it:

  • What If Amazon chose to enter the financial advice business?
  • What if your custodian decides to go direct to the consumer and bypass the independent advisor?
  • What if another firm introduces subscription pricing where asset-based fees have long been the standard?
  • What if FINRA and the SEC managed to harmonize the business models from a regulatory standpoint thereby forcing both broker-dealers and RIAs to adapt to a new world order?

None of these is a far-fetched concept. In fact, we can see some of this movement already.  Unfortunately, most firm leaders are waiting for someone else to show the way forward instead of innovating or adapting on their own.

With each passing day, the need for change becomes more urgent. Baby boomers have substantially moved into de-acumulation, though there are still some stragglers.  Gen X and Gen Y are emerging as the new wealth builders. Right behind them are the digital natives of Gen Z, who are now entering the workforce.

Their frame of reference is so much different from the client base for which the current advice model has been constructed. Those who started investing over the past 10 years have never experienced a down market. Folks of a certain age conduct much of their business on a mobile device. Many are struggling with issues like liability management and are deferring key decisions such as buying a home or starting a family by an average of eight years longer than their parent’s generation.

Most cannot relate to the Vietnam War when the draft was still in force. However, they can relate to changes in Social Security that might affect their retirement date and payments in their old age. They can see the changes in their world that has been wrought by climate change likely caused by previous generations. They can observe their parents who may not be able to afford their retirement and who are becoming dependent on them.

In the not too distant future, we will be a majority minority country, which means different cultures, different perspectives and different attitudes will influence how companies chose to do business.  How will this affect the people you hire, the clients you serve, the awareness you must glean and the acceptance of alternative ideas that you will hear?

What Will Become of Our Business?

  • As clients will want to pay for value delivered in different stages of their lives, it is conceivable we will see a legitimate alternative approach to asset-based pricing.
  • As asset managers find their margins, and in some cases their relevance, increasingly under pressure, many investment choices may simply disappear; and it is possible the passive instruments will not have an active market to prop up their performance.
  • As custodians and broker-dealers experience lower income for trading and asset values, and as reimbursements from fund companies shrink or disappear, the way in which advisors pay for platform access may also change.
  • As new clients begin to realize that the value of an advisor is to help them navigate financial decisions from financing and refinancing, to managing risk, to planning for retirement and for philanthropy, they will begin to recognize that how they are paying may not be aligned with the value they are receiving. In turn, advisors will begin to realize how they are demonstrating their value, what they are reporting on and how they are communicating will also need to change.

Indeed, what will become of our business? Leaders of the future will need an infinite mindset to think these challenges through.