Can Super Advisory Firms Help Transform Financial Services?

What do larger super advisory firms bring to the financial services industry?  A super advisory firm is an investing organization with over 1 billion dollars of assets under management. These organizations are springing up very quickly in the financial services markets. Currently, there are over 250 of these super advisory firms in the market.

Many career financial advisors see the upside of these super advisory firms is how senior level partners are being compensated. Many of these organizations are relatively new and compensation programs are still being developed. Will organizations think long or short term when developing their compensation programs. How could these programs impact future investors?

I’m not always certain that higher short-term compensation and better firm management go hand in hand when building a successful enduring advisory business. I believe attracting and developing future leaders is the secret for building great mid-sized financial advisory firms.

Many of these super advisory firms see themselves as becoming larger corporations and are incorporating many of the traits of larger corporate giants in their practice management and governance practices.

One of the major trends challenging the industry is discounted fees. These decreasing fees don’t support future partner development. Today, the advisory market leans grey as the age of planners continues to increase while their clients continue to get younger.

New emerging technologies can be a giant killer as Independent RIAs weigh their options for their careers. Today’s custodians are providing a wider range of products and services to independent advisors. Being large used to be an advantage in the financial markets but today being agile and anticipatory in how you approach new markets may make more sense for financial advisors in the future.

How do your clients see your product and service offerings? Many millennials and GenX professionals have disdain for large corporate organizations. They plan to run their own businesses in much higher numbers than past generations. How will you reach these critical clients?

In the UK we have already seen the rise of microbusinesses that can match many of services of large corporations in every way. All with less than 10 employees. They are banding together to create stronger alliances in their markets.

The challenge super advisory firms face is how they attract new talent to their organizations. In my discussions with many senior partners they do not want to develop the next generation of tech savvy advisors. They see many larger financial service organizations as the farm team for their organizations. They said it’s always been done this way. But will it continue to be the case as the next generation of business leaders take over?

Today’s younger investors are developing more sophisticated expectations of their financial advisors. People want to work with people with similar interests, backgrounds, and values.

For example, women and Hispanics are both under served markets. Women already are managing more financial resources then men here in North America. This number will rise to 80% before it levels off over the next ten years. We still see a critical shortage of women in financial services leadership. Will these super advisory firms create more flexible career options for their team members?

Hispanics are rising in economic power, but little has been done to provide financial services to this market in critical areas that they see important. We are still selling our father’s banking services without the connection that earlier generations had. Will super advisory firms help provide better solutions to this emerging market?

Razor thin margins will continue, if not get worse, as the next generation of investors evaluate their options. Many new advisors are unable to articulate their value proposition in a way that has meaning to their next generation clients.

Business development activities are highlighted in many of these firms. The problem is many of these programs use, or more accurately, don’t use, the best tools available to create stronger engagement and connection with their clients. Will these firms have the capital to invest in technology infrastructure if the economy softens? Can they get their advisors to use it?

It will be critical that you add new products and services that align more closely with the clients’ world. How will your team provide superior customer experience?

Next week we will start sharing easily implementable ideas that can help you grow a more profitable and resilient advisory firm.

See you next week!