Partnering Helps Level Playing Field for Solo Advisors

Partnering can give you that competitive edge that's necessary for survival, without stealing your independence.

By Ron Pac

Without question, the advisory landscape is undergoing a tremendous transformation that seems to be accelerating at the same pace as the movement of client assets. Independent financial advisors are competing within their own space and with a growing crop of large advisory firms for the attention of next-generation clients who are about to inherit tens of trillions of dollars over the next several decades. The stakes have never been higher for independent advisors who hope to stay competitive, let alone survive.

Clients are demanding excellence. Can you deliver?

Driving the change are high-net-worth (HNW) clients who are now demanding nothing less than excellence from their advisors in the form of personalized attention, communication-on-demand, greater participation in the process, and customized advice — all delivered through an authentic advisory relationship. Advisors who aren’t laser focused on creating the infrastructure and bandwidth to deliver consistently exceptional service will have a hard time competing for these HNW assets.

Not surprisingly, the new playing field is tilting toward those advisors with the scale and specialization to project excellence at every stage of the client relationship. This means that advisors at the other end of the field — those without scale and specialization already in place — are having to work that much harder just to keep up in a rapidly changing industry.

It’s not entirely an uphill battle for independent advisors operating solo practices, though. Technology continues to be a great leveler. For the most part, solo advisors and smaller firms have access to the same tools and resources bigger firms use. This is creating back-office and client-facing efficiencies that weren’t possible just a few years ago. But even with the right technologies in place, solo advisors are bound to hit a growth ceiling, which is a clear step toward obsolescence in the advisory business.

The biggest challenge confronting solo advisors

The problem for solo advisors isn’t technology then. Nor is it even the ability to scale. The problem is differentiation. In the cluttered and fiercely competitive advisory industry, there’s very little to distinguish one advisor from another. It wasn’t long ago that offering comprehensive financial planning was a differentiator. Today that’s just table stakes to get in the game. It’s difficult to demonstrate excellence when you’re lost in a sea of average.

“It wasn’t long ago that offering comprehensive financial planning was a differentiator. Today that’s just table stakes to get in the game.”

The biggest hurdle solo advisors face in the race to differentiate themselves is being able to get their message out. You’re not going to out-market firms 20 or 100 times your size. And even with the greatest value proposition in the world, you’re not going to be competitive unless you can reach the right people at every touch point. That’s why adding strategic marketing automation, communications and content management technology can be such a game-changer. But that type of scale requires a significant investment with no immediate ROI.

There are other ways to hone your competitive edge.

Alternative No. 1: Specialize and go niche

Many successful financial advisors have discovered that developing specialized knowledge and using it to burrow deeply into a niche is a great way to differentiate. It’s easier to market to a niche. You can allocate your time, energy and resources more effectively. You can streamline your processes to serve just one type of client. You’re not likely to come across many competitors, if any. Most importantly, you can establish yourself as the “go-to” advisor within your niche.

But there’s a hurdle here, too. Most solo advisors start out as generalists. And it takes time to develop the knowledge necessary to carve out a niche and make it productive enough to sustain your business. Yes, you might get lucky and strike a highly productive vein early on, but in most cases developing a niche is something you build toward, not something that happens overnight.

Alternative No. 2: Partner Up

The other alternative for solo advisors is to create or join an advisory team. Partnering with another advisor or multiple advisors allows you to maintain your independence while adding scale. By pooling resources, your “firm” can add staff and services and invest in the right technologies. And when you join forces with other advisors with different competencies, you can focus on your own core competencies and the aspects of the business you’re most passionate about.

Additional Reading: Stranger Things: An Early-1980s Flashback 

It’s also much easier for a firm to develop a marketable identity and brand than it is for an individual. There are simply more layers of experience and knowledge to draw on to create the type of value proposition that will differentiate you and project excellence.

Worried about your independence?

Truth be told, working alongside other independent-minded advisors costs you nothing but your “solo” status — and the burden of doing all the heavy lifting yourself. In turn, it rewards you with countless opportunities to work in close collaboration to create the conditions for sustained growth and prosperity.

You can continue to focus on delivering exceptional service to your clients. At the same time, you can gain next-generation insights in the form of younger advisors who bring fresh perspectives and new approaches to financial planning designed for younger clients. This not only gives you the chance to mentor the next generation of advisors but also to add to your own knowledge base while creating a seamless succession process for the people who’ve come to rely on you to help them thrive.

This has added value for advisors nearing their own retirement. Partnering with the right team at such a crucial juncture allows you to be fully present to all aspects of your business in ways solo advisors simply can’t be.

Ron A. Pac, AEP, CFP, CHFC, RICP, is a managing partner with Trivium Point Advisory.




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