It sounds like such a cliché these days…
“It’s hard to find an industry sector that isn’t being impacted by change.”
The problem is, it’s not a cliché. It is reality.
And the changes that hit the headlines are usually the big, highly-visible, sector-shifting changes brought on by technology-enabled businesses such as the likes of:
- Uber – launched in 2011, altering the taxi cab industry worldwide
- Xero – launched in New Zealand in 2006, and increasingly cutting out the need small businesses have for bookkeepers and old-style accountants
- Amazon – launched in 1995 originally as an online book store, now with 40% of all ecommerce sales in the USA, and in 2018 commenced local operations in Australia
Note: Not all disruption is caused by new-breed tech businesses. For example, Amazon sells standard physical products.
Most business owners face the same challenge:
How do you predict threats and change to your business?
[keep reading for 5 actions you can take]
A prime example of an Australian industry currently being impacted (some may say threatened) by change is the financial planning sector.
Australian Financial Planners – grappling with alternatives
For many years financial planning (including wealth management, investments, and insurance) was something you as a client did in person, with a financial planner or adviser.
However, the industry has a few “Achilles heels”, including:
- The lack of industry accreditation (especially in the past)
- The reliance on heavy commissions paid by product providers (usually not disclosed to clients, or not fully disclosed)
- The dominance of large product providers (financial services companies) and dealer groups (the distribution network)
- The difficulty clients have understanding the financial terminology
And the world changes.
A new type of younger client emerges, with different expectations and needs. Existing providers need to make a decision about if, when and how they should adapt.
In short, the financial planning industry is ripe for disruption from competitors who can:
- Be more transparent with what happens with peoples money
- Offer a reliable, consistent, and professional standard of service
- Make it easy to deal with them, when and how the client wants it
- Give more control to the client
This change is now underway. However even within the industry it is common knowledge that a failure to adapt can easily erode the value of a financial planning business.
That change is in the form of:
- So-called “robo-advice” which is an automated or semi-automated process of assessing a clients requirements and recommending certain investment strategies, without the need for an adviser to be involved
- Investment and saving apps that sit on your smart phone – making it easy to channel funds directly into investment products/accounts, often cutting out the adviser as middle-man
- New software being used by some advisers that uses video meetings and digital signatures to enable the planner to work with clients across the country without the need for in-person meetings (and it is fully compliant with industry regulations) – thereby competing with financial planners in other geographic territories, something unheard of in the past
But this is not new either.
An expert on changes to financial services industry in the UK told a conference in Sydney what to expect. It’s not all bad news. Importantly she says there is a place for independent financial advisers even after significant industry reforms.
So, what’s the big deal?
The urgency – for any business – is about starting the process of evolution.
Being clear on where you need to be and what the journey looks like to get there.
Too many businesses leave it too late. They hesitate to look over the horizon and see what is coming, and don’t recognise when it’s time to act.
Maybe they are scared?
Maybe they are too busy?
Maybe they suffer from willful blindness in their business? Ignoring warning signs due to inbuilt biases or intentional lack of monitoring processes.
It doesn’t really matter.
Because the changes will come regardless of whether they look. It is the relentless evolution of industry.
Update: During 2018 the Australian financial planning industry is rocked by findings from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. More regulation and lack of trust in financial institutions will follow.
Here are 5 actions you can take to avoid making those same mistakes:
- Outsource or contract out suitable business tasks to improve efficiencies and profitability while ensuring those tasks are still fully integrated in your business
- Use new technology platforms to deliver greater service and improved access to your products/services for clients
- Review your business model to ensure it is up to the task of coping in a faster, more responsive, more transparent, and more client-driven world
- Review your business planning to ensure you are putting your effort into the right areas
- Literally put ‘change’ on the agenda for your management meetings to encourage awareness and reporting of developments “over the horizon” and also what’s happening right next door so you can recognise when it’s time to act
Your next steps
We understand that grappling with these issues, and going down the path of change, can be a bit scary for most people (even if they don’t say so in public).
But we also know that ignoring the issues will be detrimental to your future success.
If you would like to discuss how these factors might be affecting your business, or to get some professional insights into how to adopt these forward-thinking practices into your business, contact us for a complimentary consultation.