Fidelity is suggesting financial advisors might have their value proposition standing on its head.
Financial advisors are focusing on the wrong priorities and must rewrite their value proposition to clients in order to be successful, according to “New Advice Value Drivers,” a report form Boston-based Fidelity Clearing & Custody Solutions.
Fidelity found that its clearing and custody clients were suffering from declining organic growth, but that they weren’t necessarily feeling pressured by the decline because of the remarkable run of equities in recent years.
“Cost pressure, regulatory pressure and shifting demographics are coming together to make [advisors] have to think about how they will reinforce the value that they drive and how to make sure that they are properly paid for it,” says Matt Chisholm, head of Fidelity’s practice management and consultant group.
When the growth of assets from the bull market is discounted, advisors experienced a net 2.8 percent decrease in client assets in 2016, Fidelity found.
The paper was released in response to a survey of 118 financial firm executives at the 2017 Fidelity Executive Forum in May that found 81 percent of financial firm leaders believed that they need to deliver value differently in the future in order to survive.
“These firms are motivated by the need to provide a better outcome for their clients,” says Chisholm.
The Fidelity report leaned heavily on the "hierarchy of needs," a theory by the late American psycholgist Abraham Maslow that was the focus of a recent Bain & Co. report.
Maslow ordered human needs as a pyramid, with basic physiological needs like air, water, food and shelter at the bottom, personal safety and financial security at a higher level and social belonging, esteem and self-actualization at the top. Maslow's theory says all the needs must be met, in order, from bottom to top: People without enough food to eat, for example, will not be in a position to worry about their financial security.
Bain’s pyramid of the elements of value begins with functional value at the base: things that save time, simplify, make money, reduce risk or cost, provide quality or inform people.