Choosing how to be impacted by specialisation
Ten years or so back I attended my niece’s wedding. I found myself talking to the groom’s father, who had recently stopped working having reached the mandatory retirement age for a surgeon. I was curious to ask him how the profession had changed during his career, and one aspect of his answer has stayed with me to this day.
As it transpired, he was a general surgeon, and he lamented that demand for general surgeons had been falling in the latter years of his career. Patients were increasingly looking for specialists – 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 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, including: compliance specialists; cloud based paraplanning services; asset consultants providing model portfolios; specialist technology suppliers spanning workflow, CRM, AI-based compliance, digital signatures and client reporting; separately managed account managers; SMSF software and data suppliers such as Class; and third party MDA providers such as Philo Capital Advisers.
These providers offer not just productivity benefits – important as they are – but deeper competencies that emerge from specialisation. 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. 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 different requirements and be more demanding.
How should investment planning business owners respond? A few thoughts that may assist: doing nothing is likely to be a poor option for businesses wanting to remain relevant and to grow. Start at the beginning, not half way along – think carefully about what you want your future value proposition to be, rather than just making what you do today more efficient. Allocate resources to the task – if you don’t have the time or skills, buy them in, but outsource the legwork, not the decision making. Look for services and providers that provide “strategic optionality”. Don’t try and squeeze round pegs in square holes. Think “value”, not “cost”. Set firm goals for implementation and hold yourself accountable. Maintain an ongoing dialogue with providers so as to keep them abreast of your evolving needs.
Good luck with your future planning and have a good week!
Brett Sanders
(Class Limited is an investor in Philo Capital.)