Are you insulated from the “Uber” equivalents in financial services?

A recent New York Times article reported that “New York City Taxi Medallion Prices Keep Falling, Now Down About 25 Percent." That headline reminded me of a conversation I had back in 2011 with a New York City taxi cab driver who confidently proclaimed his millionaire status based on his ownership of a coveted NYC Taxi Medallion. Although these medallions were valued above $1 million at the time, a disruptive force was taking shape that would transform the taxi driver’s industry and the corresponding value of his business: Uber,™ an app-based car service network. When Uber received its first wave of angel investment of $1.3 million in October 2010, the value of a NYC taxi medallion was roughly $1 million. In 2014, Uber’s value increased to $40 billion. In just four short years, the Uber-to-NYC Medallion value ratio went from 1:1 to 1:53,000. Let that sink in for a minute, but not too much longer: innovation is moving at an incredible rate.

Parallels with the advisory industry?

How many advisors find themselves holding a similar, comfortable perspective as my NYC taxi driver? Will innovation transform our industry in such a way that the value of the traditional advisor declines? I would argue that change is already upon us and that it’s driven primarily by:

1. Demographics: baby boomers retiring, millennials rising, wealth transitioning between generations, advisory community aging

2. Technology: scalable platforms, new correspondence channels, the advent of robo-advisors

The implications of these forces require a new set of tools for advisors to deliver value. Advisors need to evolve their offering to meet the changing needs of clients and the shifting landscape of advice – or they risk facing potentially damaging consequences.

Be proactive

So what can you do? Consider the following three steps as a starting point: Step #1: Make trusting relationships the centerpiece of your value proposition. The cornerstone of advice remains the same: investors of all types are seeking advice that they can trust. And that all-important trust is built on relationship depth. If your value proposition as an advisor doesn't anchor on deep relationships and trust, then your business risks being at the cross hairs of multiple competitive threats, including, but definitely not limited to, technology-based robo-advisors. Step #2: Identify when you're going to retire. Your expected remaining time in the business supplies the answers to many of the strategic business decisions prompted by the demographic technological changes. For example, if you’re planning to retire in the next three to five years, implementing a strategy that focuses on millennial investors may not be fruitful – because such a strategy is likely to take a longer time to reap rewards than you’re planning to stay in the industry. Step #3: Review the sustainability of your business. When I bring up the topic of “sustainability of your business,” advisors often jump to technology solutions. Of course, technology plays a role. But sustainability is impacted by many important non-tech factors, too. For instance:

• product inventory control
• enforced client minimums
• institutionalization of the processes that drive your service model

Creating and continually maintaining an operations manual that documents the critical processes (for instance, on-boarding, client reviews, client events, etc.) provides a tangible foundation for the institutionalization and sustainability of your business. In addition, a succinct operations manual can decrease key personnel risk and may increase enterprise value.