Trends and Advice for 2015: John Anderson


Looking back, what were your thoughts on practice management topics for last year?
The industry is maturing and frankly so are many advisors.  With the average age of financial services business owners creeping towards 60, many advisors focused on activities that added significant enterprise value to their firms.   Advisors were focusing on developing niches by segmenting by client needs and interests instead of AUM or revenue;  they were creating real value propositions around advice instead of focusing on investments and they were incorporating technology to increase profitability and scalability.  In short, successful advisors are turning their individual practices into multi-generational businesses.

Looking forward, what do you see as the emerging trends for 2015?
Advisors should be prepared to be challenged around fees and commoditization of asset allocation/investments as well as succession and continuity planning.  Online services are helping to further educate investors who, in turn, have higher expectations for the value they receive from their advisors.   The algorithmic advisors (robo-advisors) are staking out their claim as the providers of low-cost asset allocation advice and implementation.  While most advisors don’t see robo-advisors as a threat to their own business, the “robos” are, and will, continue to create disruption in terms of attracting younger and fee conscious investors.   Fees may come under scrutiny as these low cost providers gain more market share and recognition; however, until advisors start hearing the objections from clients, they will stay where they are for now.

Changing demographics will also continue to be an issue for advisory firms in 2015.  An aging advisor with an aging client base spells disaster for long-term business success.   Advisors will need to consider succession planning and more importantly continuity planning for their businesses.   However I suggest that they won’t – it is always tough to eat your vegetables.

How should advisors be planning to do best position their firms?
There has never been a better time for advisors to ensure that planning and advice are key parts of their offering.  Without a doubt, the marketplace will continue to advance; new products, new services, new models, competitors and disruptors will continue to challenge the status quo. Alongside that, investors will continue to become better educated and, in turn, have higher expectations for the value they receive from their advisors.  While CRM is the hub of an advisory business, financial planning will now be the value hub of wealth management.  Advisors should strive to construct their value propositions around what a client values and not what they can find on a website.  Advisors should be preparing now for the next wave of financial planning.
John Anderson is a contributor for Practically Speaking and also serves as a managing director for the SEI Advisor Network.
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