Financial planners will need to centre themselves at the heart of their clients financial needs in a bid to corner the markets they work in according to Undiscovered Managers chief executive Mark Hurley.
Hurley says planners face the best and worst of times as the demand for advice climbs rapidly as investors live longer and seek to finance their retirement themselves in the face of the inability of governments to do so.
However they will be faced by a growing mass of other planners seeking to tap into the same markets and those who fail to position themselves will lose out in the coming rush.
Hurley says that based on the research his group did for its recent reports in the US planners need to gain scale in their business to survive.
“In the US as well as in Australia we are seeing signs that planners have not had serious competition and superannuation has created demand. This has been met by planners while larger players held back,” Hurley says.
“But the large players have worked out where the money is as well and they are reinventing themselves for this market and have the resources to do so quickly.”
Parts of a planners business with fixed costs and low margins need to be spread across the whole client base Hurley says, building scale into the business. This places the planner in the centre with closely held third parties providing the rest of the services the planner offers.
“Competitors will not try to steal clients but rather force prices down and clients will then compare what is on offer for the price they pay. Fees will drop or services will need to increase in some cases for the same fees,” Hurley says.
“Clients remain tied to financial planners because they look beyond the performance of their money and at the services, and this also makes the value of a business higher.”
Hurley says most planners will seek to do this by creating a niche market and charge higher fees for their expertise.
Yet he says they will have to ensure they find a market that is big enough to make money but still small enough so they can capture that whole market.
