[The Institute for Innovation Development interview series invites innovation experts, innovative business leaders and emerging FinTech companies to talk to our readers about their latest innovation activities. The series seeks to learn from innovative business creators, uncover innovation best practices, and apply these insights into a financial services business model.
We recently sat down with Bill Trigleth, EVP and Director of Research & Development, Cannon Financial Institute to discuss their newest research on advisor relevance in an operating environment of accelerating change and their new 3 position papers series – Financial Advisors: Relevance Today and Tomorrow.]
Hortz: You mention in your position paper series that there are 6 major challenges that fundamentally are putting financial advisors at risk. Can you briefly outline what they are and why you state that they specifically require new perspectives and different approaches?
Trigleth: Certainly Bill. What is certain is the continuation of technological advancement in hardware, software, and artificial intelligence is going to accelerate, not slowdown. And the speed at which consumer’s react to and adopt these advancements should follow the same trajectory in financial services as we see them adopting technology in other industries. That puts slow moving advisors at risk, and our goal is to help them assess the 6 major challenges assaulting them and explore how to cope with these risks in ways that help them meet today’s disruption but also arms them with tools to identify new disruptors and effectively deal with future challenges.
The six challenges we have identified are straight forward and should not be a surprise to anyone:
1 The assumptions underlying the investment advisor’s traditional business model are no longer valid. The services Advisors provided for investment management are now available 24X7, and for pennies on the dollar. Advisor must meet the challenge of free investment management services within their profit model.
2 New Market segments are emerging and most practices are not prepared to capture them. Even the Baby Boomer’s as a segment are morphing into something new as they move into the new phase of asset spend down in retirement, they are acting much differently than when they were in the accumulation phase, and expectations of what they want from retirement and advisors is changing.
3 Today’s client is the Family. Driven by the trend of more women moving to the role of wealth decision makers, whether joining husbands in retirement planning or outright creation or transfers of wealth, their perspective is on both performance and provision. What does our family’s wealth mean for all our members? Advisors who can craft product and service sets that are helpful to each member of the family, no matter their age, stand to differentiate themselves. As advisors start thinking like today’s most successful businesses, they will recognize the total economic value of the family. This moves them from thinking of maximizing profits from an account to realizing enhanced cash-flow over time. When you think in terms of recognizing revenues from a set of parents and adding in their children’s potential, you realize every 2 child family has the potential to organically double your practice over time. There are some profound Practice valuation differences implied in this mindset change.
4 Advisors must shift from the role of technician to clinician. Technical expertise is a requirement for any Financial Advisor and yet at the same time, expert systems are coming on line that are faster, more accurate, and less expensive. Letting expert systems do what they do best: capture data, analyze it and generate and display reports, makes room for human advisors to do what they do best; take the time to explore possibilities and potentials with the client, helping them make well informed decisions and then counseling behaviors to achieve better outcomes.
5 Disruptive technologies create challenges and new opportunities. In order to create the capacity to do the more human work of identifying meaning and purpose of wealth to the families that advisors serve, technology has to be leveraged. Workflow automation, creating virtual presence 24X7, needs identification happening in real time, and changing the client experience so the client selects what services they deem valuable to them, is only possible because of new technologies. The Advisor can enjoy a reasonable profit margin because leveraging technology is what will allow Financial Advisors to flourish in this new age of consumerism
6 Tenured advisors must remain engaged. Our society cannot afford to lose the collective wisdom of such a significant portion of those who serve it. As Boomers redefine this new phase of life, Boomer Advisors have the chance to redefine what it means to to be in that role. Like their clients who now have the opportunity to focus on the non material aspects of life, it is hard to not be excited for tenured advisors and their ability to be the ones who help their clients in new expanded ways. When you have accumulated all the “stuff” you can, you are freed to explore the other areas of life. What could possibly be more rewarding than finding meaning in your own life by helping others find meaning in theirs?
Hortz: Why do you see these 6 challenges as inter-related and creating a combined impact that can only effectively be addressed by creating "a solution system" that solves all six challenges simultaneously?
Trigleth: Our world does not operate in a linear way. Everything physical and social is influenced by the interconnectivity and interdependencies of all the pieces and parts. Complexity Theory seeks to understand and at some point explain and then predict the emergence of “next” in dynamic systems. When we parse out discrete elements in complex systems, like the world of a Financial Advisor, and try to resolve something in a vacuum, it is rarely effective. However, when you can cluster big trends and influencing variables, and think about their collective impact, you can also identify a few actions that when combined, can overcome the systemic nature of the collective challenges. In our case, we see 3 abilities that Advisors can bolt onto their existing capabilities and meet the six challenges effectively.
Hortz: What are those 3 abilities needed? Can you walk us through each of these capabilities and why they are so important in converting threats into opportunities?
Trigleth: Certainly!
1. Behavioral Coaching activities are critical in redefining the value of the advisor. Behavioral Coaching activities provide the capability to connect and help everyone. They are human centric, regardless of age, gender, or ethnicity and they create the bridge from the old value promise to a new one. These activities need to be studied, understood, practiced and provided in ways that are recognized as valuable. Several studies have tried to identify the economic value of providing support and mitigating poor behaviors (like buying high and selling low). But there is so much more value available if one attains the skills required to provide solid behavioral coaching. However, those who do not go through formal training in these skills run the risk of doing more harm than good.
2. Innovation and Business Modeling are the tools of today’s most successful and forward thinking companies. Most of our industry was not formally trained in these areas. Unless you graduated from Business School in the last 7 years, you probably were not even exposed to these at the university. But there are over 5 million people around the world who have downloaded and used simple business modeling tools to create new products, services and improved processes. 4 years ago a search of the Financial services lexicon rarely mentioned the word innovation, now you cannot escape it. Innovation and Business modeling create the path to avoid being swept way by the waves of change.
3. Leveraging technology is the third ability. As Advisors play catch up to the world of their clients, they will recognize that in order to match their clients’ preferences for consuming services, technology, they will have to deliver them at the scale required to offset the pricing pressure shoving margins on investment management to a few basis points. But it will be technology that also creates significant opportunity to bring a different kinds of value to create competitive advantage.
Hortz: You also prescribe that advisors need to change their business orientation from an internal one to an external view. Can you explain the needs and practical outcomes in changing to this perspective?
I mentioned the age of consumerism earlier. Some call it the age of personalization. Either way, people expect to get what they want, the way they want it, when they want it. Industries outside our own are setting whole new expectations for what constitutes a great client experience. Now add to this these industries are using “Design Thinking” to create product and service sets that are aligned with the specific jobs clients are trying to accomplish, reducing the pains and capturing the gains they long for. This is much different than how most advisors approach their offer, which is, “here is what I do, now let’s go find as many people as I can to sell it to”. Well in our industry many Advisors have not even done a rudimentary segmentation of their book. And even when they do this, it is focused on the benefit to the Advisor not the consumer. Great companies and sophisticated industries did that type of segmentation back in the 50’s. It is amazing that consultants in our industry are still plying the idea of crafting a single client experience for a practice, the market is way beyond that. Current technology is capable of delivering hundreds of different client experiences, but Advisors are not thinking about how to do that. They are barely making the move to codify and deliver one kind of experience. Advisors need to be thinking about building platforms that clients can then personalize. The best example is to take a room full of people, and have them compare their smartphone home screens. None will look alike, yet they are all on 1 or 2 platforms. The platform (technology) is what creates the ability to allow personalization while still creating profit at the level of each user.
Hortz: Please highlight for us the specific steps in the path you are proposing for advisors?
Trigleth: The steps are clear and straightforward:
1. Get great at behavioral coaching. Don’t do it ad hoc and untrained. There is rigor and discipline in performing coaching activities. Choose a valid behavioral assessment like DNA Behavior’s suite of behavioral coaching tools and then go through a development program to become an effective coach.
2. Learn the process of innovation and participate in a local innovation incubator of some sort to identify and assess the impact of disruptors. Use business modeling tools like the business model canvas to ideate, test and implement new ways to deliver value to the market. Get rid of annual strategic planning and use this business model innovation approach continuously. This is how you move from vulnerable to always viable.
3. Invest the time to understand all the features of your current systems and technology and then use them creatively. Learn to write out workflows, transcribe them into your CRM’s workflow engine and automate constantly. If you use eMoney and Redtail like a fancy rolodex, you are wasting money and your future is grim. Make your technology platform the backbone for delivering your value promise to the market profitably.
Hortz: There are large mindset and behavioral changes from advisors' traditional practices to this new approach. How do you motivate them to take this journey?
Trigleth: The power of this systemic solution (applying all 3 new abilities at the same time when addressing the six challenges) is in providing a path for success. When people see there is a path, they are less afraid of the future. The good news is that advisor does not abandon their current behaviors, they just bolt on these new abilities and are thoughtful about their use as they address these and other challenges. Advisors are smart, and they recognize change is constant and needs to be addressed. What is needed for wholesale change is a catalyst, like the DOL’s new regulations. This whole conversation could be recast as moving to a successful response to the DOL Fiduciary standards. Take our message and this episodic event and you have created the critical mass need to overcome Advisor inertia.
Hortz: What is your best recommendation for advisors on how to best start making changes in their firms to address these encroaching challenges and opportunities?
Trigleth: Well it is self serving but I recommend Advisors read the positions papers, and watch the short video’s at cannonfinancial.com/advisor-relevance then join in the discussion. It is happening all around. The Institute for Innovation Development is also a great place to learn about and access innovation resources, as is Cannon Financial. And of course I welcome calls and emails. I believe this is a critical time for Advisors and I would enjoy hearing and sharing other’s thoughts.
For further discussions on this topic, feel free to contact Bill Trigleth at [email protected]
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.