The journey prospective clients take on the way to finding a wealth management firm is changing dramatically, mirroring a profound shift that’s occurring across all sectors of our economy and society. Wealth managers who turn their marketing sails to catch this change will find powerful forward momentum. Those that don’t will find the headwinds punishing.
What’s Near Me Versus What’s Best For Me
The primary governing mechanism for all human commerce is transitioning rapidly from proximity to search. It is the change from “What’s near me that would suffice?” to “Where can I find the very best of exactly what I need and want right now at the best price and on the best terms?”
Why is it happening? The Internet and related technologies of storage and mobility have made virtually all the world’s information immediately and ubiquitously available to an enormous swath of the world’s population. Those same technologies increasingly also enable connectivity to every human being on the planet.
When all the world’s information can be tapped into instantaneously and is indexable, granularly sortable and shareable, what’s offered for sale by the nearest merchant or service provider is no match for the shopper’s ability to quickly locate exactly what’s needed or wanted.
That’s bad news for anyone who’s trying to sell everything-for-everyone breadth. It’s no match for depth and expertise when it’s easy to find precisely what’s wanted. Search, by definition, is the tool used to eliminate all the “everything” except for what’s being sought.
Bad News For Traditional Referral Marketing, Too
The move to a search-based dynamic is also bad news for businesses relying heavily on a traditional referral network to surface new prospects. The long-standing notions of how potential clients find firms to meet their financial services needs (a country club member turning to his locker mate and asking who manages his money, or the entrepreneur asking his accountant if he has any suggestions on who should handle his finances) are largely proximity-based.
If you believe the “ask your neighbor” dynamic is unassailable, ask yourself this: Is a 35-year-old technology entrepreneur—whose entire professional life has been supported by Internet functionality—going to launch her exploration of firms to manage the $15 million she’s getting three months from now for the sale of her company by quizzing people who happen to be using an adjacent gym locker? Or is it more likely that her very first information-gathering impulse will happen at 9:30 p.m., when she is alone in her office, after all her employees have headed home, with a simple Google or Yahoo search along the lines of “expected returns on $15 million portfolio”?
The Zero Moments Of Truth
That very first step on the purchasing journey, which Google itself calls the “Zero Moment of Truth,” presents a unique opportunity for service providers our imaginary entrepreneur doesn’t know (and may have no possible connection to) to “get in the game.”
Will she buy her wealth management services right then online? Will she wire your firm her $15 million for you to manage via an all-digital click-and-invest process? Of course not. She won’t now and probably never will. But that doesn’t mean the front-end client acquisition dynamic isn’t changing profoundly. It is.
So with ever-increasing frequency, wealth managers (and businesses of every sort) will need to ensure that they’re the answer to someone’s search query. If they are, they’re in the game—they’ve created an opening for dialogue, which creates an opportunity for a relationship.
But to be that query answer, a firm must be the very best, most authoritative, most capable and most accessible provider of that information or that expertise. All of which implies a dramatic coming requirement for wealth management firms wishing to be highly competitive in a changing marketplace to have a real focus and specialization.
Why not just dominate all search terms for investing? Well … it’s impossible. If your firm is the answer to “ETFs and fee minimization,” then you’re NOT the answer to “best stock-picking advisors.” Why not just focus on the big, general terms? Few serious prospects search for all-encompassing terms, as it defeats the purpose of search in the first place. It’s not of much use to try to be the answer for someone querying “investments” or “financial advisor,” but it just might be a powerful thing to dominate “best financial advisor for female tech entrepreneurs.”
That doesn’t mean that proximity is fully dead or ever will be. It’s tough to find a plumber who can unclog your drain digitally, or a restaurant that can send you a good digital egg white omelet. But if you deal in expertise, the chains (and the privileges) of the physical world have been broken. That freedom is both a boon—and an existential threat—to your business.
The Four Horsemen Of The Economic Revolution
In addition to the rise of search, there are three other key information forces driving this revolution:
Frictionless Collaboration
The word “collaboration” is defined quite literally as “the act of laboring together.” Working together has by and large required physical co-location. But the creation of highly capable technology tools that allow distance-killing collaboration largely without cost has removed the core imperative for gathering workers (or any kind of “collaborators,” such as an advisor and a client) in the same space. The benefits of working with the best now come without the crushing cost that formerly led to working with the closest.
Big Data
Big Data is the collecting, storing and analysis of gigantic streams of data describing any activity or phenomena on planet Earth. The much-discussed National Security Agency telephone monitoring program is a Big Data exercise, but so is Apple’s storehouse of customer click behavior on iTunes, metadata on traffic flows on L.A. freeways, or a large wirehouse’s aggregated data on client trades and investment decisions. Our powerful processing and storage technologies allow the collection and sifting of the digital descriptions of, more or less, all human life. Analysis to determine what factors caused variances in outcomes yesterday allows for enormous efficiencies in preparing for and influencing tomorrow’s possibilities.
The Rise Of Tools
A previous economic revolution—the Agricultural Revolution—also marked the era in which human beings learned to manufacture tools, ranging from simple farming implements to simple machines like the pulley. We’re seeing something similar happen on the Web today, where massively powerful information tools (think Twitter or Google Earth, for instance) are shared freely and fuel remarkable innovation and adaptation across society. They can launch a million ships of incremental or transformational change in a thousand industries and fields of endeavor before companies using traditional methods have a chance to even load their cannons.
Implications For The Future Economy
The potential implications of this Economic Revolution are vast. Over human history, the form of our society has followed our economic function. Farming worked better than hunting for meeting human needs, but demanded the development of property rights and writing and mathematical systems for trading. The Industrial Revolution required workers in proximity to factories, leading to the urbanization of much of the world’s population—as well as to mass literacy and public education.
So it goes now, with this information-driven economic system emerging and proving to be more powerful at providing for human needs and wants. To be sure, economic disruptions are occurring in the short run—but they’re being driven by the emergence of a far more powerful information-driven engine. What new demands does the emerging system require? A new literacy—a digital literacy—for certain, as well as a certain familiarity and inventiveness with the new tools of our time.
Seeing the future is hard. My crystal ball is no clearer than your crystal ball. The best indicator of where things might go is where they have gone in similar times and under similar dynamics in the past. And that’s why I believe we’re headed for a radically changed economic structure.
There will be less benefit to being a large, vertically integrated company. Nobel Prize-winning economist Ronald Coase wrote in 1938 that companies existed in the first place to minimize the friction and cost of performing dissimilar functions in the open marketplace. It simply cost too much, in other words, to collaborate without central command and control, which companies brought to that low-information world.
Now? Not so much. The broad world of business is likely to be far less dominated by multinational corporations, which of course impose their own gigantic costs of bureaucracy and organizational friction, and populated to a far greater extent by smaller, more specialized companies collaborating in large, flexible ecosystems.
That kind of free-flowing system of economic activity and collaboration is powered by search and specialization—which are in turn fueled by reputation, credentials and relationships. Your firm’s truth, in other words, put on display for the world to see and access.
And it’s this aggressive and complete display of your firm’s truth—transparently visible to all digital seekers and collaborators—that begins to take dominance over traditional proximity-based referrals.
What It Means To Wealth Management
Let’s revisit those four driving forces of the Economic Revolution and consider their effects on the wealth management business.
Search Replacing Proximity. The same work you’ve done to build your firm’s reputation and authority in a world based on referrals and physical proximity must be transplanted to the digital world. Having an attractive Web site that’s actually nothing more than a pretty digital brochure won’t cut it. Striving to understand the interwoven fabric of the digital universe—how search is powered by technology but fueled by your content; what others are saying about you and your area of expertise on social platforms; and your own authority, visibility and reputation—is the new table stakes in the wealth management game.
A search-driven world demands real focus and depth of expertise. Your firm can’t be the answer to everything, and is in fact vastly better off picking its spots and moving heaven and earth to dominate them.
“The essence of a great brand,” one thinker on the subject said, “is truth.” Your firm’s truth needs to be that it is the best in the world at something, and that something should become its predominant calling card.
Frictionless Collaboration. In a wealth management context, frictionless collaboration has three implications:
1. You can increasingly “collaborate” with any client, anywhere. If you choose to master the right tools, you can effectively target highly focused client constituencies anywhere in your regulatory jurisdiction and successfully work with them. The beauty of search, of course, is that it allows you to target prospective clients as effectively as it lets prospective clients find you. As transparently demonstrated expertise counts for more and more, and as generations of Skype-happy, video-friendly digital natives become prevalent in the population, your ability to capture your 500th large animal veterinarian client (because you know exactly how they think and what they need), even when he’s from Tucumcari and you’re from Teaneck, becomes exponentially greater.
2. You can increasingly “collaborate” with any employee, anywhere. The mirror image of the new client reality: You can assemble every professional on the planet you need to dominate large animal veterinarians as clients, regardless of where that professional resides. You need not be in the same physical location, so you’re now freed to find the best asset gatherers and relationship managers and back office staff wherever they may work and live. And you may consider, subject to regulatory restrictions, exactly how sharply you can focus in on your core competencies while jettisoning others to the collaborative ecosystem.
3. Focus means admitting that there are things you’re not the best in the world at. Following a strategy of informationalized specialization means you’ll necessarily want to develop a world-class network of providers around your firm and actively think through how the economic arrangements can be realigned to harness the new realities.