What You Need to Know
- Advisors need to understand which type of firm they're leading, so they can best prepare it for future success.
- There are three types of future-ready advisory firms, and each type serves a different type of client in distinct ways.
- They all grow by offering the best client experience possible.
The rate of change in the financial advisory profession is increasing. The pandemic played a large role in forcing a digital shift, of course, but rapid change was happening even before then.
As the industry adapts to a new way of interacting with clients, advisory firms are at a crossroads. Each firm has to decide if it wants to be part of the future or stick with the way things have always been in the past.
Firms that are determined to be relevant for years to come can be grouped into three business types. Each competes with a set of unique characteristics.
It’s useful to know the differences so you can understand how to categorize yourself and position your firm best in the changing advice market.
There are three types of future-ready advisory firms, and each type serves a different type of client and serves their clients in different ways:
1. Emerging Firms
Emerging firms are small, with less than $1 million in annual revenue. These firms have embraced their size and reject the narrative that small teams will be consolidated into large firms.
They believe that they can set themselves apart by providing financial advice that focuses on one problem that consumers need to solve.
Whether they decide to provide retirement planning to employees of a certain company or go as narrow as to focus solely on stock options advice, their differentiator is that they identify with one area of specialization and stick with it.
They win by delivering a custom client experience for a very particular type of client.
2. Progressive Firms
Progressive firms can be any size, but most tend to be multi-billion-AUM firms. In contrast to emerging firms, progressive firms radically expand their services instead of limiting themselves to serving only financial planning or investment management clients.