Stepped-up advisory consolidation and an upsurge in clients embracing digital advice are two major changes the coronavirus pandemic will bring about in financial services, Ron Carson forecasts in an interview with ThinkAdvisor.
The influencer, who, over 37 years, has built a big multifaceted firm comprising Carson Wealth, Carson Partners and Carson Coaching, argues that financial services is “at the bend in the road”: Advisors must be committed to their business “heart and soul” if they are to succeed in the coming years.
The Omaha-based RIA, serving more than 33,000 families, grew from a practice Carson launched in his University of Nebraska dorm room in 1983. The most recent expansion came in 2012, when he established Carson Partners, attracting independent firms that the CFP has either acquired or in which he owns a lesser stake.
Carson Group has $12 billion in assets under management and more than 280 partner advisors nationwide. There are more than 120 partner offices, of which 24 are Carson Wealth branches.
“Trust in advisors is at an all-time low,” Carson, 55, states in his new book, “Proven in the Trenches: 11 Principles to Maximize Advisor Value and Transform Your Firm’s Future” (Harriman House-May 12).
At the start of the Kindle version, updated after the pandemic hit, Carson candidly opines that “financial services have for decades over-charged and under-delivered to the consumer.” Elsewhere in the book, he urges FAs to “turn this industry into a truly respected profession.”
In the interview, Carson discusses the “value war” in which advisors now find themselves; “accidental CEOs,” who need help shifting from FA to company leader; and the 200,000 square-foot office complex he’s constructing in Omaha that will feature a young-advisor training program in his philosophy and process.
Readers of “Proven in the Trenches” stand to gain by incorporating into their value proposition Carson’s “6 P’s”: promotion, presentation, positioning, people, process and pricing.
But perhaps the real secret to the born entrepreneur’s indisputable success is keeping a laminated list of goals in his shower. This lets him subconsciously work out business solutions, he insists.
ThinkAdvisor recently interviewed Carson by phone. He cautioned that advisors who fail to provide clients with “a great digital experience” will encounter rough seas.
Here are highlights of our conversation:
THINKADVISOR: Financial services is “at the bend in the road,” you write. Please explain.
RON CARSON: Advisors will have to make a choice: Are you going to put your heart and soul into your business — or just sit back and relax and collect your 1%? I think [the latter] is a really bad choice. You need to evolve and adapt. You need to anticipate clients’ needs before they know they even have them and provide solutions they didn’t know were possible. That’s the “third dimension” of trust, and that’s what will be expected.
There’s “ferocious competition” for quality advisors, a major recruiter stressed recently. Hasn’t that always been the case?
Yes, but today more so than ever because of the group we call “the rich and tired” — advisors that have done really well but are, kind of, worn out. They’ve gone through the 1987 crash, early 1990 recession, dot-com meltdown, global financial crisis and now the pandemic. So, they go, “Screw it. I don’t need this anymore.” They’re “retiring” [by] taking the cash flow from their business until there isn’t any cash flow left.
You write that the advisor “fee war” is actually a “value war.” Please elaborate.
Advisors that define themselves as [solely] asset managers are under a lot of pressure because no one is willing to pay for something if they don’t see the value. For example, when COVID-19 [struck] and the big first market decline occurred, we were [connecting with] many of our partner advisors telling them, “Here’s what you should be doing and thinking about”: Roth IRA conversions [for one].
What else are you doing to help advisors address this crisis?
At the end of the second quarter, we’re rolling out a service that, by looking at the client’s past tax returns, generates specific actions that will save them money on their taxes. It’s all integrated into a seamless experience.
Exactly what does adding value do for the advisor’s practice?
The important thing is that the client can see the value and say, “Oh, that saved me ‘X’ and that saved me ‘Y.’” Eighty-two percent of our partners who have added that kind of value are showing significant inflows year over year. Our inflows are five times what they were year to date. This validates [the premise] that the consumer is looking for the high-value provider.
How will the coronavirus pandemic change advisory firms themselves?
It will accelerate scale — that consolidation we’ve been talking about for a long time. It started with Schwab eliminating transaction fees and then acquiring TD Ameritrade. Then COVID-19 hit, and all margin and cash were eliminated. This has put tremendous pressure on custodians. It will make them put pressure on advisors because they’ve lost transaction fees, and now they’ve lost their spread on cash.
How will they pressure FAs?
I predict they’ll say, “You need to pay us for services now.” But a lot of smaller advisors don’t have scale and are [only] marginally profitable. So if they have to start paying for services, it will force a lot of them to make a choice: get bigger, partner, or sell their firms.
How has the pandemic changed FAs’ day-to-day business?
We’re all figuring out how to communicate and deliver services differently [through video-conferencing, for example]. Even clients that had been very uncomfortable with Zoom, GoToMeeting or other such technology have now realized that it’s nothing to be afraid of and pretty easy to use.
What are the longer-term implications?
I think it’s going to accelerate the number of people that will be very comfortable getting advice digitally through their advisors.
You spoke a few minutes ago about anticipating clients’ needs. Would that occur through personal interaction or digital technology?
Both, either human integration or digitally. Technology is powering a lot of the processing and number-crunching; I don’t believe it’s going to replace the advisor. It will simply make the experience richer for clients and enable advisors to have time to spend with them. More and more consumers will be very comfortable receiving all their advice digitally.
Should advisors be planning ahead for that right now?
If you don’t provide a great digital experience, your business is going to face a headwind in the future.
Advisors charge for investment management, but less than half charge for financial planning services, you write. How much attention do FAs pay to financial planning?
Most advisors offer some component of planning, but the plans are [rarely] updated. Or they keep the plan current on an annual basis, but there’s not a lot [of updating] in between. Technology can help the advisor make recommendations proactively.
In view of the pandemic’s financial impact, should advisors be rethinking retirement planning?
No. I think the pandemic is going to have all kinds of changes within our society that we can’t even anticipate. It’s too early to be giving very specific advice because we don’t know how it’s going to change our world in the future.
From an advisor perspective, what’s your take on the concept of retirement?
I don’t like the term “retirement.” I like “financial security” and “living your life by design, not by default.” It’s crazy to keep doing something you don’t love for the majority of your life. So we’ve been a big part of clients’ [decision] to walk away from making a lot of money [at work they don’t enjoy]. They make less but are much happier. We encourage clients not to be a slave to something.
You write that the 11 principles to maximize advisor value presented in your book are “table stakes.” What other principles go beyond these basics that you believe advisors should adopt?
One is to really differentiate your firm. You can have a culture that executes all 11 principles but [end up] with a sterile environment. [Realize that] what people are starving for today is real connection. They especially want to know that you and your firm truly care.
Sixty-five percent of Americans don’t trust financial services, you write. How can advisors change that mindset?
lf you build trust through your culture and then extend that to a feeling prospects and clients have, your business will be in the top one-tenth of 1%.
Carson Coaching is a division of the Carson Group. You started coaching FAs in 1993, a decade after you became an advisor. Why do FAs seem to need lots of coaching and support?
Because most advisors never got into this industry to be business owners. They’ve become what I call “accidental CEOs.” Good advisors grow their business; but, eventually, they’re like, “Holy crap, I didn’t expect to have all these other things to do. I don’t have time to spend with my clients anymore.” So a lot of them need help to move from being an advisor [only] to the CEO of a business. Working with a coach helps give them confidence that they’re making the right decisions.
What’s your key strength as a CEO?
My philosophy has always been: Hire the best people, and get the heck out of their way. A second [strength] is: I spend a lot of time thinking. A moment of thinking can be worth hours of doing. I think a lot about the future and what’s possible.
You’ve failed at more things than those you’ve succeeded at, you write. What’s an example of a failure?
I was a terrible hirer. I was a terrible manager — a task master. I was terrible at investing adequate amounts in technology. It wasn’t until I surrounded myself with people a lot smarter than I that I quit making those kinds of mistakes. But I’ve never viewed failure as failure — only as a learning experience. I’ve also learned to trust other people and let them fail but learn from their own mistakes as well.
You write that you keep a laminated list of your purpose, goals and vision in your shower. How come?
I’m a big believer in connecting the conscious and subconscious minds. If you’re looking at these things [his list] constantly, your subconscious will actually work on solutions. I also carry a laminated copy in a black bag that’s with me [every day]. I have it on my iPad too. I keep my goals in front of me all the time so that my subconscious can be thinking about solutions.
You became an advisor when you were still in college. What prompted your interest in financial services?
I was going to be a farmer; but in 1982, when interest rates were sky-high, my parents went broke farming. So my dad told me to find something else to do. One day, thinking about what the hell that could be, I was sitting in study hall reading Money Magazine. I saw an article about becoming a CFP. My mom had traded in commodity futures. I had invested in a couple of stocks with about $10,000 I earned from my newspaper route and by trapping furs. So when I saw that article, I thought: That’s the business I’ll go into!
What’s next in Carson Group expansion?
We’re building a 200,000-square-foot office complex here in Omaha. We’re also going to be heavily investing in the future by growing the next-generation advisor. We’ll train them in our [process] with a vocational internship program that [ascends] to full internal stakeholder [employee] in the company. We think this program is going to be huge.
Why primarily are you undertaking it?
There won’t be nearly enough financial advisors in the future. So we’ll [acquire them] from the stable of young advisors we’re growing. They’ll be trained in our process and philosophies, our culture and our system.
On your website, you reveal some personal “favorites.” Your favorite food is wine. Food for thought?
Fermented grapes! With [stay-at-home orders] because of COVID-19, I’ve been doing a lot more cooking, trying different recipes, which has been fun. I’m also taking singing lessons. I was doing that in person before; but now I have a half-hour online lesson with my teacher once a week.
Which genre of music?
Storytelling music — Frank Sinatra songs like “Come Fly with Me.”
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