Size matters. It’s good being the 800 pound gorilla. Many futurists have been talking about how the financial services landscape will change post Coronavirus. Here are eight mistakes the big wirehouse firms should avoid.
1. Maybe we don’t need all that real estate. Years ago, my firm’s equity marketing team would call on offices in distant cities. This was before the days of GPS and Smart phones. Can’t find the office? The advice was: “Find the tallest building on the skyline. The firm’s office is in that building or the one next to it. The firm’s name will usually be on top.” Impressive real estate conveys trust and confidence. Why do you think traditional banks were in imposing buildings with big, visible vaults?
2. Maybe our advisors can work from home. Why do they need to have desks in expensive buildings? The major competitors have been online firms with no brick and mortar locations or only storefronts. RIAs tend to work from smaller offices, sometimes in their homes. When you give up the “office environment” you give up an advantage.
3. Advisors can videoconference with clients. It made sense during the pandemic. Clients don’t need to travel to the advisor’s office or vice versa. When the client sees the advisor in their office, seated behind a desk, there’s a sense “She’s really part of the firm.” Real estate agents often work from home, only using the office for closings in conference rooms.
4. Let’s get away from active management. It’s easy to do everything with ETFs and tracker funds. It keeps costs down. The advisor keeps an eye on the financial plan, looks at the big picture and adjusts asset allocation. Most of that can be done by robo advisors. It’s the stock picking, manager selection and replacement that adds an important human element. Everyone might not need it, but every advisor should be able to deliver it.
5. Let’s cut out training and coaching. It’s difficult to connect to profitability. It’s expensive. We lose advisors to attrition and recruiting. Lots of training is available online. We could develop our own. They can be trained through their team structure. Training developed and administered by the firm goes a long way towards delivering a uniform client experience, regardless of the office the prospect enters.
6. Let’s not hold conferences anymore. It makes sense from a social distancing point of view. They are incredibly expensive. When you have agents, advisors and wholesalers often working in isolation, you need frequent large meetings to bring them together and create a sense of community. We are part of a larger organization.
7. Volatility is the new normal. As the ten-year bull market continued, we knew a pullback had to happen sometime, we just wished it wouldn’t. There are advisors who said: “This was expected. We don’t need to call our clients about it.” The personal relationship with an advisor is why people pay extra. If hand holding didn’t happen, clients can feel alone. How is that different from trading online or having a robo advisor?
8. Marines vs. Mercenaries. Suppose you need rescuing. Both can do the same job. Some hired professional soldiers might be ex marines. The marines have a larger tool kit. If you need air support, they can call in helicopters, drones or missiles. Promote the home field advantage. The big firms are the Marines. They have constant training, discipline and lots of resources they can call upon.
It’s rare, but sometimes industry leading firms cede the home advantage. They discover this after the fact. It’s difficult to recapture market share.