When advisors are confronted with an issue in their business—whether it’s about client acquisition, expanding margins or carving out more free time—they would do well to ignore the conventional wisdom and take a counterintuitive approach to cope with hurdles. After all, just because everyone else is doing something a certain way doesn’t mean you should too.
An excellent first step for advisors is to reconsider what constitutes “good work.” To be clear, just because you are doing more work doesn’t mean it’s good work. In fact, the opposite is often true.
Then, advisors ought to take a closer look at the investment vehicles they deploy and how they use technology. Far too many advisors unnecessarily load up portfolios with excess holdings and have little appreciation for how software can accelerate their operations.
Without question, no shortage of advisors have been able to “get by” without optimizing their operations. However, that’s precisely the problem: Because they get by, they aren’t compelled to re-evaluate their practices. But when it comes time to sell, they tend to learn the hard way that getting by, year after year, wasn’t the best approach.
Investments
An unconventional way to look at investing is to liken it to the auto industry. Toyota sells a lot more vehicles than Ferrari, but Ferrari’s brand is far more coveted, and the company typically builds a higher quality car, which, all things being equal, translates into a better overall user experience.
Now think about a client who has exposure to 200 different mutual funds, ETFs, stocks, bonds and alternatives, and compare that to a strategy that only includes 20 different liquid funds and securities that each serve a specific purpose. It may seem counterintuitive, but the practice that deploys fewer investment vehicles but, on average, has higher quality holdings will have an easier time entering and exiting positions as market conditions shift—and, in general, be able to better justify their actions to clients and regulators.
Equally important is that by relying on a streamlined menu of investment options, advisors can devote more time and effort into getting to know clients versus spending countless hours vetting products—many of which turn out to be unnecessary and ineffectual. Winnowing the herd of unwieldy investments without harming clients could take several months—or even years—depending on market conditions. At the end of the day, a client who loses money because the advisor could not keep track of all their investment positions is not going to care that a lot of hard work went into attempting to avoid that outcome.
Technology
Meanwhile, an unconventional way to look at advisor technology is to consider the Starbucks service experience. If every time you went to Starbucks, it was the barista’s first-time grinding beans, steaming milk or operating the register, you would probably stop going there. However, it’s the opposite: The company has an efficient system for preparing food, collecting payments and moving customers along to make room for the next sale.