Recall the time when we had hockey in our lives and imagine you are watching a game. This game, however, is very different from any other you have seen — it’s the financial services industry version and you are a star player.

To begin with, there are three or four teams on the ice at the same time — banks, insurance companies, mutual fund dealers, financial planning firms, full-service and discount brokers, direct sellers, credit unions or “do-it-yourself” portals. There is more than one puck in play: deposits, securities, mutual funds, alternative investments, insurance — to name a few.
Anyone can score using any puck.

The playing surface is ill-defined and the game sometimes takes place outside the arena, on the Internet or even in grocery stores. Each team brings its own referee, and the teams are all fighting among themselves to see who gets to be Chief Referee — surprising, given that the rules of the game are not decided by the league or teams but by government officials who occasionally drive by the arena.

Fan loyalty is fickle, and many are willing to trade their long-held season’s tickets for a seat at the rock concert of some one-hit wonder who is briefly in town. Furthermore, the outcome of the game is not decided by how many goals are scored but by the media, most of whom have never played the game.

Despite all this confusion, teams from foreign lands are breaking down the arena doors to get in. They are bigger, faster and better equipped than we are, but we let them in because they said if we didn’t, they’d buy us out. Besides, if we are good enough, maybe someday we’ll get to play in their leagues.

If you can imagine all this, you have a good picture of the state of the financial services industry today and what practitioners must do to survive and prosper. The starting point is accepting that the traditional game plan no longer leads to victory. The good news, however, is that the changes are an evolution, not a revolution, and even if you are not already on the right path, it’s not too late to catch up.

That path has taken everyone — the industry, our clients and ourselves as advisors — through several transitions. The industry has experienced a number of paradigm shifts that have taken us from a selling orientation to a marketing one and now on to a business-management focus.
In the 1970s, for example, advisors could prosper by being good salespeople.
Products were simple “one size fits all” ideas in which we tried to massage the customer’s needs to fit our limited product line. Through the 1980s and into the ’90s, we learned about financial, estate and investment planning and how to “target market” people who legitimately were likely to have an interest in these more relevant solutions to their financial needs. The entry of the resource-laden banks and their brokerage-firm offspring into the business in a meaningful way took the industry to new levels of marketing sophistication.

Today, competitive realities have moved all players up a notch, and the most successful advisory firms are those that have mastered the art of being in business. The emphasis is now on defining the type of business you want to have, identifying the clientele you want to serve and putting in place the resources required to make it all happen.

While all this was going on, our clients developed new perspectives and preferences. Buoyed by investment markets that only went up, consumers became somewhat cynical of the value of advice and looked to technology as a source of financial information, comparison shopping and low-cost transactions. As the perceived value of advice eroded and products were commoditized, service became the only relevant differentiating factor among advisors. But how to meet clients’ accelerating service expectations and remain a viable business in a world of shrinking margins? That question leads us to examine the typical growth curve for advisors.

In the beginning, it’s all about survival — scrambling, making mistakes, learning lessons in the first 12 to 24 months of our careers. Client relationships are based on filling product needs as much as anything.
Typically, that takes advisors to the $100,000 revenue level and up to $10 million in assets under management. We have few, if any, systems in place and wear multiple hats — salesperson, marketer, administrator and business manager. Then one day we hit a wall as the energy we used to survive wanes and we start to wonder if it is all worth it. If we conclude it is not, regrettably, we leave the business.