Choosing how to be impacted by specialisation
Ten years or so back I attended my niece’s wedding. I didn’t know the groom’s family and found myself talking to his father over a glass of wine before we sat down for the wedding dinner. It turned out he had recently stopped working having reached the mandatory retirement age for a surgeon. I was curious to ask him about how the profession had changed during the course of his working life and one aspect of his answer has stayed with me to this day.
As it transpired, he was a general surgeon, and he lamented the fact that demand for general surgeons had been falling in the latter years of his career. He said that patients were increasingly and understandably looking for specialists and that meant, for example, that if someone needed a knee operation, the referring doctor wanted a surgeon that did dozens of knee operations a year, not one that might do one every now and then. This struck me as profound; that even someone as highly trained as a surgeon and who could rightly be considered a bona fide expert, was impacted by changing expectations in his market during the course of his career.
The modern trend towards specialisation in the retail investment advice world is interesting to contemplate. The trend applies to the various roles that exist around the investment planning process, and it is increasingly playing out in the technology sphere as well.
A host of specialist third party providers have emerged to service financial planners, often supported by new technology. Examples include:
Compliance specialists
Cloud based paraplanning services
Asset consultants providing model portfolios (as opposed to research subscriptions)
Literally dozens of specialist technology suppliers spanning functions such as workflow, CRM, artificial intelligence based compliance, digital signatures and client reporting,
Separately Managed Account managers
SMSF software and data suppliers such as Class[1]
Third party MDA providers – such as Philo Capital Advisers
These providers offer not just productivity benefits – important as they are. They also offer deeper competencies that emerge from specialisation. Just as the surgeon that devotes their career to knee surgery has a greater ability to be up to date with all the latest techniques and issues to do with knees, so too the dedicated compliance specialist or portfolio manager should be expected to bring insight that enhances the user’s business or their client services or both.
Notably, while the role of the adviser is impacted by the use of these specialists, their central place in personal advice and the management of client relationships is as important as ever. Personally, I don’t see this changing.
However, this rich choice of specialist services is creating new challenges for AFSL holders and practice managers. The breadth of choice, and the complexities involved in combining services to achieve a goal can be formidable. Further, these specialist roles continue to evolve with competition and developments in enabling technologies, meaning that the possibilities are not static. To top it off, practice owners are facing a tsunami of inter-generational wealth transfer in the coming 10 to 30 years as the baby boomers “leave the stage.” The next generation are going to have some different requirements and be more demanding. Convincing them that you have the right services will be the first challenge.
How should investment planning business owners respond? There is no set formula to address this dilemma, but here are a few thoughts that may assist:
Doing nothing is likely to a poor option for businesses wanting to remain relevant and to grow. If you do not consciously plan for the future, others may decide your fate.
Start at the beginning, not half way along. In other words, think carefully about what you want your future value proposition to be and what that means for your business. Don’t just set about making what you do today more efficient. It may be that you are missing the bigger opportunity. Doing this should provide some organising principles to evaluate new services against. If you end up confirming your current direction - well and good – but be open to the possibility that changes, large or small, could be valuable.
Allocate resources to the task. Mapping and realising your future value proposition is not a background task. If you don’t have the time or the skills, buy them in, but outsource the legwork, not the decision making.
Look for services and providers that provide “strategic optionality”. i.e. those that are likely to keep evolving, offering you further utility and / or which can be changed without undue cost or disruption.
Don’t try and squeeze round pegs in square holes. The right provider or tool for one job may not be the right provider or tool for another.
Think “value”, not “cost”.
Set firm goals for implementation and work systematically to achieve them. Hold yourself accountable to achieve the benefits you have planned for.
Maintain an ongoing dialogue with providers so as to keep them abreast of your evolving needs and ensure you get the most out of their services as they continue to develop.
Good luck with your future planning and have a good week!
Brett Sanders
[1] Class Limited is an investor in Philo Capital