Relationships driving the future success of advisory firms

Financial advisory firms that create a culture of innovation will become more receptive to the changing nature of client relationships and partnerships, Sherise Mercer writes.

In industries around the world we are seeing significant changes to traditional market dynamics as the impact of new technology, liberalised public policy, increasingly complex regulation, and greater consumer choice change the way businesses operate and the experiences consumers have come to expect.

These global trends are also having an impact in financial services. In our own market, factors like the faster flows of knowledge, greater competition, regulatory change, reduced barriers to entry, and evolving expectations from clients are changing the environment in which we operate.

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Within these changing market dynamics, clients are increasingly looking for shortcuts to getting what they need, in a way that feels personalised for them – and at the centre of this is finding an adviser they trust and whose networks they can tap into.

The result of this is that now more than ever, the value for financial advisory firms lies in enduring client relationships, where they can meet both a broader range of practical needs as well as the emotional needs of clients.

While in the past more transactional and technical expertise-led client experiences may have sufficed, today successful firms are responding to changing expectations by rethinking their approach to relationships and becoming experts in their clients’ needs, while not necessarily meeting all of those needs directly themselves.

Firms are also realising the value of converging the disciplines of accounting and financial services to meet a more holistic range of client needs, and the lines of segmentation across the industry are becoming more blurred as a result.

Our recent Australian financial services industry benchmarking report found that more than 50 per cent of multidisciplinary firms with both financial planning and accounting in-house earn revenues of over $2 million per year, compared to just 30 per cent of firms overall.

Importantly, in-house models aren’t the only way to approach this opportunity and successful firms are also embracing the idea that convergence can come through partnering rather than self-sufficiency alone.

Almost 40 per cent of firms are providing the complementary discipline through referral partnerships, allowing them to still service the broader needs of their clients and form stronger relationships, without the complexity of increasing their own direct service offering.

However for advisers to truly make the move from the role of technical expert to relationship expert, a shift in mindset is required, and we see four key ways to achieve this.

Have strategic clarity

To win in this changing environment, businesses need an open and flexible approach. Being clear about your core competitive advantage, point of difference, and where value is created for clients is critical.

However, just as important is appreciating what is non-core to your business and from there, what can be outsourced or done through other partners. 

Our financial advice consumer research indicates that many clients are not interested in understanding the underlying technical details of advice.

They make their financial decisions based on the quality of connection and trust built with their adviser.

With this in mind, what is the best way for your business to focus on developing scalable and deeper relationships to meet the broader needs of clients? Or do you want to specialise in an area of technical expertise and take the opportunity to serve not only your own client base in this specialist area but also serve other ‘generalist’ advisers through referrals? 

Sophisticated partnership management 

Partnerships offer significant opportunities to deliver new services and experiences to strengthen relationships with clients, however firms need to choose who they partner with, and in what way, with care. 

As more firms look to external partners to serve a wider range of client needs, managing the nuances of these relationships will be more important than ever. There are two key things to consider.

The first is building an operating model so that no one partner can disrupt your business. Successful firms retain the flexibility to ‘change out’ partners when needed to ensure they continue to deliver a best in class client experience. 

Secondly, while being one of your partner’s largest clients is a positive thing, being their only client can bring out new challenges, as the best partners will be those who remain out in the market, continuing to learn and innovate.

Stay curious

As global market dynamics influence the future direction of the industry and the experiences clients now expect, keeping a strong outward focus on competitors and what is happening in the broader market is key.

Staying connected through industry networks is one of the simplest ways to keep abreast of new developments and ensure your offering remains relevant, and these networks can often foster new learning opportunities and referrals.

Understanding that new opportunities to build knowledge and ideas can come from anywhere is also vital.

Looking beyond financial services to the companies and industries leading in client relationships and experiences can provide inspiration – this could be a particular company you admire or even to the impact the likes of Uber and Netflix have had on traditional industries by offering highly personalised consumer experiences that understand what their clients want, and what they might feel they are missing out on with existing service providers.

Constant reinvention

While it can be easy to fall back on the things that got your business to where you are today and expect the same positive result in the future, the path to success is constantly changing.

As technology, the regulatory environment and new customer demands drive the evolution of the industry, firms need to be prepared to reinvent themselves to respond to new challenges and opportunities.

The way in which your team is structured also plays a big role in how well you can adapt. Keep teams small and nimble to find new ways of operating. Being prepared to test ideas and learn and adapt quickly will maximise chances of succeeding. 

Encouraging a culture of innovation and new ways of thinking among your team will not only bring about more opportunities and greater creativity, it will build a business which is more receptive to evolving the way you approach the changing nature of client relationships and partnerships. 

Ultimately, we believe the changing dynamics of financial services offer significant opportunities for Australian firms to better understand clients and create more scalable, profitable and client centric experiences.

Those firms who remain open to the changing nature of client relationships, new partnerships and creating a culture that encourages their team to do things differently will reap the benefits in future. 

Sherise Mercer is the division director at Macquarie Wealth Management.

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