Financial planners are facing many challenges in the next couple of years due to the increasing use of technology in the industry.
Those planners who embrace the technological changes and adjust their business to match will enjoy an exciting future. For the rest, the future looks bleak.
JOHN WILKINSON reports from the Financial Planning Solutions Summit 2000 and de-scribes some of the trends that are shaping financial planners’ futures.
Financial planners are facing many challenges in the next couple of years due to the increasing use of technology in the industry.
Those planners who embrace the technological changes and adjust their business to match will enjoy an exciting future. For the rest, the future looks bleak.
JOHN WILKINSON reports from the Financial Planning Solutions Summit 2000 and de-scribes some of the trends that are shaping financial planners’ futures.
Small to medium-sized financial planning groups have an uncertain future in the next five years as the bigger organisations come to dominate the industry, says consultant Tom Collins.
“The industry is consolidating and the big ones are getting bigger by buying distribution at any cost,” he says.
“I think the medium-sized financial planning groups are a diminishing force and the boutiques still think life is beautiful. They are in self-denial.”
The time scale for how planners will conduct their business is moving so fast, Collins is unwilling to predict what will happen in the next five years. He is only willing to predict as far ahead as next year, saying technology is playing a deciding factor in the survival of some sectors of the financial planning in-dustry.
“Technology means accessibility, means products become commodities, means prices coming down and empowering the customer,” he says.
The pushing down of prices means the adviser is going to need to come up with more to justify their fee for service.
Collins says fund managers are also going to have to look at their back-office operations because the adviser also wants better service.
The discount brokers will impact on the back-office operations as they demon-strate how trades can be performed quickly.
“Redemptions (from fund managers) are manual-based and slow,” Collins says.
“This will lead to a switch to direct share trading rather than using managed funds. And this leads to a changing role for advisers.”
The clients will want better value from advisers, he says, and that will lead to more fixed fees. This is what the customer is experiencing with the direct bro-kers and they are becoming used to a flat fee.
Collins says it will mean the average planner has to become better at running their business to achieve viable practices. Competition will come from large in-stitutions, like the banks, which can deliver fixed fee-for-service operations and remain profitable due to economies of scale.
“Clients will be harder to get and retain,” he warns. “To keep them, the planner has to do more for less.”
According to Collins, planners are facing five choices:
1. Do nothing
2. Be a niche player
3. Become part of a multi-disciplined practice
4. Become a dominant player, or
5. Get out.
Collins says most planners will choose the first option and be doomed. The sec-ond option has the same outcome. The survival options are three and four, but that choice will mean the planner has to hone their management skills to suc-ceed.
