Schwab’s new subscription-based financial planning service shouldn’t scare advisors
If you are a NextGen RIA, you know better than to engage in the fear mongering. I have been monitoring Twitter and the number of people expressing their anxiety by tearing down Schwab’s new offering is astounding.
Some get back to center by realizing that the value they provide to their clients was never in question. That is what I’m going to write about today.
When you provide immense value you never need to look at your clients in a way that says they are not intelligent individuals. Whether you like or not, that is what you convey when you fear new innovations in your space.
You have three main paths to take when a new offering/service is introduced into the marketplace:
1. Copy them
We have seen what happens when you try to copy innovators without truly examining the strategy of wading into the waters with them…you get killed. Not only that, but you will end up wasting too much time and diminishing the value proposition you were already providing to your clients to begin with.
Do you remember when every firm was so worried about robo-advisors that they launched their own? Many of them have concluded that aimlessly following innovations without tying it to a core strategy will knock you off tilt.
This is a great time to suggest that you should be talking closely with your clients. Surveying them at regular intervals to get valid feedback on how you are currently doing things and new initiatives you are rolling out. They will be the first to speak up and say…’if you do this, we will not engage with it.”
Not nearly enough RIAs talk with their clients to help them build out new services and revenue streams.
2. Ignore them
Do this at your own peril. By ignoring them, you are saying that the change is fleeting and that the market will not support it.
Generally, firm owners get to this conclusion by examining their past experiences. Betterment didn’t squash RIAs with 1–2% AUM fees. Vanguard didn’t really make a dent either. As a matter of fact, I bet most of the clients they receive are DIY or high-level delegators who have never paid for advice and wanted a better way to manage their own investments.
This does not mean you should ignore new innovations…this is simply another way to get beat. For RIAs with no succession plan and aging partners, you can skip this part. For RIAs who have another decade left or who have succession planning strategies in place, make sure you take the steps to adapt to the current tech climate.
I have worked in organizations that still have all client docs in file cabinets, do all planning in excel, and the lead planner couldn’t even work his email. This will not cut it and your clients will eventually see through this once they encounter the benefits of a truly modern financial services company.
3. Up your game
Upping your game is my favorite choice of the three. It means that you acknowledge that the industry is changing and that you need to adapt to the changing winds. What do you do?
You take the temperature of your client base. Does the value proposition you shout from the rooftops (if you aren’t doing this, add this to your list of to-dos) match with the value they receive? Many firms may be surprised to hear that what they think they do for clients is not actually what clients think they do. This disconnect not only harms retention, but it also harms growth through referrals.
If your clients cannot articulate and sell your firm to their connections, you aren’t doing the best job at sharing your value proposition (or you aren’t really providing value).
When it comes to financial services, there is always a place where you can take it up a notch. Yesterday I was talking with a planner with a local RIA who has just opened up a Pro athlete team, a Lawyer-focused team, and added a behavioral approach to the mix as well. It’s very easy to tell that they are not only differentiating the services, they are also making sure that they are adding value at every turn by building service models for each niche they serve.
Most firms don’t have those kinds of financial resources, but you can start small. You can find out what items your clients most appreciate you for and what areas of their lives do they wish you had more of a presence in. The results may shock you. You may find out that you need to hire a career coach or a divorce attorney.
