Missing Pieces and New Gatekeepers in the Financial Services Industry

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Read Rise of the Super Models: Myths and Realities in the Financial Services Industry.

Before we dive into the three Super Models in detail, let’s look at missing pieces and the new gatekeepers. 

Missing Pieces

Business management is not just about putting out or preventing fires. It should start with strategy and follow with creating or aligning resources to support well-defined goals. However, for many advisors, most days it can feel like the whack-a-mole game. One of the employees doesn’t show up or you have a human resources issue and four people have to try and talk about how to deal with it. Or if there is a compliance issue, the owner(s) and key staff members will get together and try to figure how to deal with it.

Even though somebody might be tagged as “manager,” nobody is dedicated to actually performing that job as their top priority. Independent financial advisory firms are fairly complex businesses whose owners are dealing with all the normal business issues, from making sure the lights come on, the technology works, clients are happy, the human resources issues are handled, and so forth – all the normal things that come with being a manager. As firms grow, if no one is really filling a dedicated management role, there will be stumbles.

Broker/dealers, custodians and others have tried to fill the gaps for advisors, but most are not keeping up with the changing expectations advisors have of their industry partners. While almost all IBDs have created an advisory offering, simply supporting advisory and/or commission-based business is not enough.

Three Super Models have emerged to fill that vacuum. Here’s why:

  • To create a new segment
  • To replace dying intermediaries and close the service/support gap on the direct models (IBDs and custodians, respectively)
  • Maturation of career from sales to a profession similar to the accounting, medical or legal practice models
  • Partner models – mergers of equals where no one takes the lead in terms of management – rarely work 

The New Gatekeepers

In the late 20th century the term gatekeeper came into metaphorical use, referring to individuals who decide whether a given message will be distributed by a mass medium.

In the financial services industry, gatekeepers control access to segments of the financial advisor population.

Who are the new gatekeepers?

Let’s say you are a TAMP, asset manager, or fintech firm selling services to advisors. You may be struggling to get in front of advisors and trying to figure out how to position your products and services. From my perspective, advisors aren’t your target market. They might be the end-user of your services but they are not the ones to whom you really need to appeal.

The mistake a lot of these firms are making is saying, “we are going to call on RIAs or independent reps – either one of those is a population that can be easily identified or segmented.” But these advisors and reps live in all sorts of different channels. If you are selling to a particular segment, to get to them in a cost-effective manner, you have to work through the new gatekeepers.

In many cases, the broker/dealer is not the gatekeeper to the rep. Even the reps that are affiliated with independent broker/dealers don’t necessarily see the broker/dealer as the gatekeeper. But there might be an intermediary, such as Morningstar, that the advisor sees as their primary relationship. In reality, all advisors have primary and secondary vendor relationships.

You might define it as a new segment if you are trying to figure out how to get to an advisor market. We might declare that these new independent access models or “intermediary access models” are the new gatekeepers for reaching certain segments of the advisor population.

If you are an advisor reading this article, I encourage you to jot down your primary and secondary vendor relationships. This will help you make better business decisions as you consider how to build your practice for the future, especially as you consider the Three Super Models and how they can help you realize better levels of success.

If you’re selling tech, marketing, social media or other services – the advisor isn’t your target. Hello – ‘tis the emerging intermediary.  These are the new gatekeepers.

Maturing Profession

There is a lot of talk in our industry about career paths and whether the financial services industry has matured from “sales” to a “profession.” Some say it has become a profession. Others say its still basically a sales career. The good news, in my opinion, is that we are seeing more and more independent financial advisory firms successfully emulating the medical, legal and accounting world.

A professional career path is emerging with various stages such as starting as an intern, becoming a junior advisor, then a senior advisor, and ultimately a partner candidate to where you are actually in charge of services delivered to clients. This type of career progression takes a number of years.

The legacy business model in our industry really hasn’t created an effective blueprint that consistently delivers professional training and a predictable career path. In prior decades, the advisor might have just gotten a license and a little on-the-job training; the client had a hard time ascertaining if the advisor had been in the business for 10 minutes or 10 years.

For a profession to grow, there needs to be a professional culture complete with an environment of support and mentoring/coaching. The Super Models are clearly stepping in and creating this professional platform, where it had been difficult to find. We’re seeing noteworthy progress among some forward thinking career insurance-based models as well where some firms are modifying their field office support structure to better meet advisor business requirements. 

Part of what we see with the traditional ensembles is that some of them, if they are fairly far along, are creating logical career paths. They are creating environments where people can work at a junior level, an associate advisor level, and eventually move up to a senior advisor or partner level. One of the reasons they are attractive to both the senior advisor and the junior advisor is that is creates a path for succession and continuity of the client-service model – thus it looks more like a profession. It’s where the next generation of advisors tend to be looking so it bodes pretty well if you can bring new people in and have them take over practices as partners retire; that’s kind of the definition of a profession. That’s how the accounting and legal profession work. 

Partner models have also been evolving for a while. This is where two advisors form a partnership but they are not clear about roles. It sounded good at first and could have created some economies of scale, but they can’t seem to declare who’s going to manage the business or who’s going to be responsible for various functions. This is a recipe for frustration. Instead of going that path, advisors would be better off joining a Super Model because it should give them the benefits they were looking for in a partnership but at a lower cost, with lower risk.

Click here for a more detailed discussion of why advisors join one of the Super Models.

It’s a super human effort to assume any one person, no matter how dedicated, will be able to do everything needed to build a truly successful business under the traditional models. As the business grows, one or more of the key services or business functions will inevitably suffer, or the advisor will find themselves working evenings and weekends just to catch up on everything that they missed during the week. This is the ceiling of complexity, the paradox of success for many advisors: they feel trapped in their business, they are so busy keeping the business afloat that there is no time or mental elasticity to enjoy the money they earn. While some have found ways to outsource or delegate some of their duties, there is supervision and management needed there, which may or may not have a silver lining to it.

Read Rise of the Super Models: The Three Models Explained

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