Back in 2003, I reviewed Bob Veres’s book, The Cutting Edge in Financial Services, in which he made observations about the trends that were shaping the financial advisory industry and the role of advisors in particular. I commended that book for its “thought-provoking insight.”

Veres’s book-length white paper, The Future of the Financial Advisory Business: Opportunities, Challenges and Trends in the Second Decade of the 21st Century, is equally impressive.

Although this paper was released in April 2010, it has never been more relevant. Veres, one of the industry’s most respected commentators, explores the impact the economic crisis of 2008-09 has had on our industry and offers predictions on how the world of the financial advisor will change as a result.

The bottom line is that a revolution — not an evolution — is underway: “The market meltdown … appears to be accomplishing what every significant environmental crisis does in its aftermath: accelerate the evolution of those nimble enough to respond and accelerate the decline or demise of those [who] are not.”

The most important change, Veres writes, will be sudden, dramatic and irreversible growth in practice efficiency and professional management, leading to a transition throughout our industry from financial planning practices to financial planning businesses.

This trend will be driven by the merging of smaller practices into offices of two to four advisors or principals for succession-planning purposes or to achieve required economies of scale.

While the market meltdown had compelled advisors to re-examine and refine their internal processes and systems, a groundswell of demand for the services of a fully qualified, independent financial advisor will force even more increases in practice efficiency.

There will be much greater interest in and need for professional practice-management advice and support to equip advisors to run their larger and increasingly complex businesses.

Compliance costs will rise. Veres compares the emerging regulatory environment in financial services with the legal liability experience of the U.S. medical profession in the 1960s.

Veres does see bright spots
on the horizon for those advi-sors who take up the challenge of making the transition to a business from a practice.

Veres predicts increased availability of practice-management advice through other than one-on-one coaching. The advent of online, generic programs or semi-customized training through supplier-sponsored programs will open up professional practice-management advice to advisors who might otherwise avoid seeking support in this area due to the cost of most fully customized programs that exist today.

“Off the shelf” software specifically designed to meet the productivity needs of the modern financial advisory practice will become more available, Veres writes. The market calamity of 2008-09 has demonstrated that advisors need improved technological infrastructures, such as back-office and client relationship management systems and portfolio rebalancing capabilities. Where these were once accessible only on large-enterprise systems, such programs will be affordable and manageable at the practice level.

Veres’s paper bases its analysis on the world of advisors in the U.S. who run fee-based, discretionary trading practices. That does not in any way diminish the relevance of its observations or conclusions, and I believe this latest view into the future by Veres will once again stand the test of time. IE