The Future Belongs To Those Who Evolve Alongside Their Clients

In 2016, I tackled the single most important issue affecting my business. It was becoming clear to me that my more financially sophisticated clients were looking for something different in wealth advice. The nature of their needs was changing and I was struggling to be relevant to the most important client segment in my business.

An institutional, product-centric value proposition was not what these clients were seeking, yet that was what my business was configured to deliver. These clients were seeking a service that was more bespoke, agile and unconstrained and, most importantly, a service untainted by conflicts of interest. My licensee arrangements had served me well in the past; however, it was clear that a vertically integrated licensee was no longer able to meet the emerging needs of my most important clients. While the problem was not yet acute, it wasn’t hard to contemplate the respective trajectories of my client needs and licensee focus and recognise there was a misalignment I could no longer ignore.

What caught my attention was the emergence of a new model in Koda Capital. I had known Koda chairman Steve Tucker from MLC days and respected his client-first approach to advice. So I caught up with him for a coffee. As he laid out his vision for the future of high-net-worth (HNW) wealth advice, I could see the alignment of his view of the professional firm of the future (Koda) and my view of what my clients were seeking. It was a succession of lightbulb moments.

Focused on high-net-worth clients

Koda has a clear focus on delivering for the needs of HNW advisers. The business model is founded on three principles: independence and advice that is free of conflict; alignment of partners through shared ownership of the business; and empowerment of partners to ensure client needs can be met. Koda provides specialist partners in tax and structuring, investment strategy, philanthropy and family leadership to allow advisers to respond to what wealthy clients are interested in and concerned about. For me, the combination of entrepreneurial spirit, service relevance and shared ownership was compelling. This is what a profession should be!

To move from my current, successful business was going to require major change. I was going to have to re-invent myself and my business. This was not going to be easy.

The simple proof to validate my decision is that my business growth since joining Koda has been phenomenal. My base revenue and funds under advice have doubled in nine months. My typical client fee has risen fivefold. I have never had such a pipeline of prospects. This is what happens when you can deliver a compelling solution to a client need that the current market is leaving unmet. What was just case study for me at Stanford is now being made real in my own business.

Trust requires constant evolution

This success has its own rewards, but it also points to some underlying messages that are relevant for all advisers who aspire to be at the leading edge of wealth management.

Firstly, trust between a client and an adviser is the foundation for good advice, and sustained trust requires independence. The scandals that have played out in the wealth industry since the global financial crisis have taken an enormous toll on client trust in what advisers do. Clients are prepared to pay for good, conflict-free advice but so many advisers operate in business structures constrained by conflicts of interest. It may be unreasonable to expect incumbent business models to drive innovation that puts their existing business at risk but that is exactly what will need to happen if client trust is to be restored. I had to own this decision and believe that advisers who truly serve their clients’ interests will own this decision as well.

Focusing on client needs requires a constant evolution in one’s business model. Clients are witnessing rapid change in the world and this affects their attitudes and perspectives like never before. Good advice in today’s world needs to be tailored specifically to client needs. It needs to be agile and responsive to changes in needs, attitudes, the regulatory environment and investment markets. Investment strategies need to be flexible and opportunistic. Clients worry about their kids and their communities as well as tax and investment returns, so advice needs to be as much about emotion as it is about intelligence. Institutional business models founded on scale, distribution and cross-selling simply cannot respond to this ever-changing client need.

Finally, and perhaps most importantly, there is a clear line of sight now on the path to becoming a profession. The characteristics of client demand and the profession are now aligning. Empowered advisers operating in independent, agile structures that can respond to changing client needs are the future of wealth advice and, more than ever, that future now rests clearly in the hands of advisers who each, like I did, have a choice to make.

 

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