Posts Tagged ‘advisory firms’

Wealth Managers Day Of Reckoning

Friday, July 28th, 2017

 

The need for financial advice is at unprecedented levels, what is being increasingly exposed is the “competency and passion deficit” in many private wealth advisory firms. With greater complexity and ambiguity in their private clients’ lives, there is an increasingly unmet need for both increased “speed” (real-time decision-making) and higher “quality” (better performance, lower cost) resources. You cannot achieve that without new thinking, abandoning irrelevant activities and new approaches to regulation and compliance. A great many market practitioners question the sustainability of the robo-adviser retail advice model (Betterment, Wealthify and others) on account of their client acquisition costs but what is undeniable is that without old thinking and systems, they have a huge advantage for those seeking low-cost advice. For small and mid-market firms, who pride themselves on traditional advisory propositions, I confidently predict the next 12 months in N. America and Europe will see record consolidation and exits. The real question for the owners of these businesses, is the shortest route to your “ideal future” a friendly merger or sale now or driving on further into even more hazardous conditions with close to zero visibility?

© James Berkeley 2017.

 

The Best Re-Inventor Award

Wednesday, February 25th, 2015

In Oscar week when you think of truly great film stars (Bergman, Olivier, Brando), not just the celebrities the glossy magazines salivate over, arguably their greatest skill is their ability to career reinvention. They escape the routine typecasting, which leaves some actors and actresses careers “beached” in the minds of their audience  (Hugh Grant, Dudley Moore, Eddie Murphy). Much the same danger lurks in advisory or brokerage businesses with alarming consequences. Firms, particularly those with a strong brand earned in the “cut and thrust” of transactional deal making, inherently find that their clients form a visceral connection with their brand. That bond is the “glue” that creates loyal and “permanent” clients, management and employees. In so doing, maximising the value of the franchise.

Here is the rub, when those firms seek to reinvent themselves with higher-margin, higher value advisory services, particularly around strategic not tactical issues (growth and expansion), they often come across resistance in two forms, personal and business:

Personal

1. Buyer’s Self-Worth – the cherished transactional buyer within a key client thinks they “own” the relationship with the advisory firm and its’ key people. They are reluctant to promote an advisory firm’s expertise (strategic), in areas outside their own expertise and experience (tactical). They “fear” that in making the introduction to the “strategic” buyer or worse,the results that arise from the relationship may reflect negatively on their own judgement, repute and reward. While they may respect and like their adviser, they don’t see clearly what’s in it for them (financial gain, increased repute, future career opportunities etc.).

2. Adviser’s Self-Worth – the key point person in the advisory firm is reluctant to promote his or her colleagues strategic expertise (no trust). There is a perceived and sometimes actual “fear” (risk of destabilising or destroying the transactional relationship). There is no personal non-monetary (promotion, repute) or monetary incentive to do so. Indeed, the relationship is akin to the adviser’s “pension”, why put it at risk for little or no visible benefit?

Business

3.  Client Credibility – the advisory firm’s brand attributes and specialised transactional expertise are etched in the mind of the transactional buyer and their peers. Their key people are less well known or unfamiliar with the buyer(s) of strategic expertise. They might not  be seen as “peer” of the transactional buyer. Finally, there may be perceived or actual conflicts with the firm’s transactional work.

4. Adviser Credibility – the leadership of the advisory firm don’t see themselves as “peers” of the strategic buyer or other strategic advisers, sometimes with good reason (don’t hang out with the strategic crowd). Their beliefs inform the behaviour and attitudes of their subordinates. When pressured by the client to include strategic expertise in the client offering, the transactional advisers use leverage to throw strategic expertise in for “free” and fear pushing back (loss of a key transactional client relationship). They don’t actively promote the expertise to clients and new prospects, rather it is “a bunch of guys with MBAs sitting in expensive offices at the end of the corridor, who never seem to make us any money”.

Leaders have three options: accept the “status quo”, circumnavigate it or blow right throw it. First, let’s take a step back and answer some essential questions that will enable us to find the shortest, quickest path  to our goal:

1. Why are we intent on reinventing our firm in this direction (future health and well-being of the firm)?

2. What is the ideal result we want to accomplish (stronger brand, happier clients, more valuable firm)?

3. What options exist that can meet this goal (triage existing client relationships; prudently expand the firm’s transactional offering in concert with existing clients’ internal expertise; introduce new strategic relationships to existing transactional clients; leverage referrals)?

4. What options can we create that meet this goal (hire in qualified expertise; leverage new strategic alliances with external experts; create new value propositions; new strategic products and services for existing transactional clients and strategic prospects;  create new strategic intellectual property; build and lead new communities)?

5. What perceived, actual or catastrophic risks are attached to each of these options?

6. What preventative or contingent action could we apply to avoid or evade these risks?

7. How do the risks and rewards of each option stack up?

8. What is the firm’s propensity to take risk in relation to reward?

Armed with this knowledge, the advisory firm’s leadership can make wise decisions consistent with the firm’s strategic direction.  Firms such as IBM, Blackstone, EY and others have successfully created, built, leveraged and exited strategic advisory businesses as their strategic direction has evolved.

In my experience, too often leaders in advisory firms fail to apply this level of rigour and focus. Their aspirations to re-invent or recast the firm’s value proposition are just that aspirations that never become a reality. Powerful voices within the advisory firm project biases that has little do with what is in the firm or its’ clients’ best interests (ego, self-serving). The best laid plans sit in three ring binders, blown off course by a leaders who absent themselves from leading the process of change. Yet reinvent, we must constantly do if we are to increase our learning, attract smarter employees and reduce the level of uncertainty and competitive threats to our firm’s future.

© James Berkeley 2014. All Rights Reserved.