What one thing will be most dramatically different in this business five years from now, compared with today? This question was asked after I spoke at a recent conference of financial advisors about what it will take to succeed in the future.

My first instinct was to go to the reliable standbys, responses such as operating in what many analysts are forecasting to be a lower-return environment, the consequences of an aging client base, the impact of technology and increasing competition from banks.

While all these will probably be influential, none factored into my two-part answer to the question.

The first thing that will make our business dramatically different five years from now lies in increasingly demanding and knowledgeable clients — who will focus not on historical relationships but rather on the value they’re getting today.

And the second is advisors’ competitive response to those value-conscious clients should focus on narrow client niches.

To put it in simple terms, advisors targeting high-end clients will need to shift from being generalists, typically dealing with a broad array of clients in differing circumstances and with divergent needs, to being specialists, dealing with one or two narrowly focused client segments.

There are three exceptions:

> This will not necessarily be true for advisors who focus on mid-market clients, for which there is less competition.

> This will not always be true in smaller centres, where the limited pool of available clients makes it necessary to cast your net more widely.

> Finally, this will not be an issue for advisors on the twilight of their careers, who have limited time left in the business and who are doing all the right things for clients and have the powerful force of inertia working for them.

But, as a general rule, advisors who want to build businesses with high net-worth clients probably will be at a competitive disadvantage if they are positioned as generalists.

Why? The answer lies in the world around us, and in the lessons we can draw from other industries and professions.

On the first issue of a shift in client mindset to a value-driven, “what have you done for me lately?” mindset, the evidence is indisputable. In category after category, what divides winners from losers is the ability to deliver clear value relative to alternatives.

Think automobiles. The winners: Toyota, Hyundai and the other Asian manufacturers, as well as the German carmakers. The losers: GM, Ford, Daimler Chrysler.

Think retailers. The winners: Wal-Mart, Costco, and big specialty retailers such as Staples and Best Buy. The losers: the traditional icons that, not long ago, defined retailing, such as Sears Roebuck, JC Penny and Montgomery Ward in the U.S.; Eatons, Simpsons, Woodwards and the Bay in Canada.

Or consider airlines. The winners: the upstart discounters, led by Southwest Airlines, followed by Westjet in Canada and firms such as Ryanair and EZ Jet in Europe. The losers: the traditional airlines that failed to adapt their business model to focus on value. (Air Canada deserves credit for being in the lead to shift its business model.)

It’s not that the advantage of incumbency and historical relationships has entirely disappeared. But these factors are a lot less important than they used to be, having been replaced by ability to deliver a superior value offering.

For any buying decision that matters today, increasingly knowledgeable clients will migrate to whomever they perceive offers the best value. And the more knowledgeable the client and more important the decision, the truer this will be.

But you don’t have to be offering poor value to be left in the dust. Lots of small and mid-sized clothing, toy and electronics retailers offering reasonable value with good products, decent selection and, in many cases, superior service are now roadkill because they couldn’t compete with the Wal-Marts of this world on price.

The late Vince Lombardi, coach of the Green Bay Packers in the 1960s, was noted for his expression: “Winning’s not the most important thing; it’s the only thing.”

In our new hypercompetitive world, the watchword on any important purchase will be: “Providing superior value is not the most important thing; it’s the only thing.” And this will also hold true for financial advisors.

The focus on value is not new, of course; people have always gone to where they could get the best deal. What is new is the fixation on value at the expense of historical relationships, and how quickly anyone with an inferior offering risks seeing customers defect — as well as the speed at which superior value today becomes a parity offering tomorrow.

@page_break@Advisors have been through several iterations attempting to provide differentiated value over the past 15 years.

In the early 1990s, merely offering plausible-sounding recommendations on mutual funds seemed valuable to many inves-tors who had spent their lives in guaranteed investment certificates and were looking for better returns as interest rates dropped.

I recently talked to an advisor who recalled the fascination with which prospective clients looked at the comparative performance of different mutual funds back then. Being able to show those fund performance comparisons and making recommendations on superior-performing funds had represented real value.

That was a time when the banks were severely conflicted about whether they wanted to be in the mutual fund business. In no small part, this was because of concern about eroding their GIC business, apprehension about selling products with which customers could lose money and aversion to providing advice, with many holding the view that banks should be in the business of offering alternatives and letting customers make decisions for themselves.

That was followed by a shift, in the late 1990s, to value via a financial planning approach to clients’ needs. Being willing and able to prepare a financial plan represented real value — and financial planners in every bank branch now offer to do so.

The most recent shift in value has revolved around ramped-up communication (frequent phone calls, e-mail, regular meetings, lunch and dinner workshops) and, for higher-end clients, a comprehensive solution to their financial needs, including not just investments but tax and estate planning as well as charitable-giving strategies .

Again, these may represent value today. But, if successful, they will be matched by competitors and will probably not stand for value tomorrow.

Which takes me to my second observation about what other professions have done to stand out when it comes to value: the answer, increasingly, lies in specialization and focus.

Twenty years ago, for example, most major accounting firms had consulting operations that provided a full range of services, from executive search and relocation to broad-based strategy and operational review. Partners would announce they had secured an engagement to search for the client’s new vice president of sales or plant manager and hand that assignment to the two or three people at the firm who did the search.

By 2000, none of these consulting practices (which have been spun off because of conflict-of-interest concerns) did search work, executive relocation or much of the other work they had done not long before.

The reason? As clients became more sophisticated and focused on profits, the accounting firms couldn’t compete with the boutique firms that specialize in search, relocation and other specialties.

The bottom line is that generalists are fine as long as they only have to compete with generalists. Once specialists come on the scene, the competitive dynamic fundamentally changes.

In the next issue, I’ll explore how to shift the focus of your practice and become a specialist in one or more client niches. IE