Recovery Road

For Financial Services: Change is a Constant

Key traits and three trends that drive success

by Craig Hawley

Mr. Hawley, head of Nationwide Advisory Solutions, formerly Jefferson National, is a regular contributor to this magazine. Visit

Change is a constant in our fast-moving industry. And you can win by recognizing that the very same trends that are driving this change are not your obstacles—they are your allies.

Case in point: This past September marked the ten-year anniversary of the biggest financial crisis to hit markets since the Great Depression. Today, it is clear that the recovery from the 2008 financial crisis has helped redefine the way advisors work with their clients in a number of noteworthy—and positive—ways.

Ten years ago, the U.S. financial system began a downward spiral that would bring it to the brink of collapse, shaking the foundation of the global economic system and eroding investor confidence to an all-time low. Today, academic studies such as the most recent University of Chicago Booth/Kellogg School Financial Trust Index shows that Americans’ faith in our main financial institutions is steadily improving.

Likewise, in Nationwide Advisory Solutions’ recent snap poll of more than 370 RIAs and fee-based advisors, nearly three-quarters of them (74%) say that investors today are more likely to work with a financial advisor than they were prior to the crisis. These advisors also say that their own clients are more willing to follow their advisor’s advice (90%), increase engagement about their financial situation (89%) and create and stick to a financial plan (84%) than they were before the crisis.

Successful Advisors Adapt to Three Powerful Trends

Adapt—or be left behind. This is also one of the most fundamental lessons of our most recent Advisor Authority special report on successful advisors. Successful RIAs and fee-based advisorsthose who individually earn $500,000 or more or individually manage AUM of $250 million or more—are the true change agents of our industry. By studying the ways they tap into trends to create their competitive advantage, you can define and ruthlessly refine your own path to success.

As the pace of markets accelerate and the world around us is becoming increasingly complex, our study recognized three forces that are having an outsize impact: the rapidly expanding digital economy, the power of consumer demand and the push of regulatory reform. To thrive, all advisors must adapt to these three forces to build a more successful practice and establish a viable franchise for the future—or watch the competition leave them behind.

Innovate to Keep Pace with the Digital Economy

The unprecedented pace of innovation in the rapidly expanding digital economy is transforming everything around us. Anytime anywhere access to almost everything has reshaped the way we communicate, learn, entertain ourselves, buy the things we need and want—and of course the way we manage our money.

One factor which sets the most successful advisors apart from all other advisors is their focus on technology. As Advisor Authority has shown, successful advisors spend more on technology and use more technology. They make technology a practice management priority, use it to effectively manage risk, improve efficiencies and increase accuracy, leverage it to enhance client relationships, attract the next generation of clients—and ultimately to drive greater profitability.

And when it comes to new technology, there is perhaps no force more important to harness than the competitive edge of Artificial Intelligence (AI). Once the domain of large institutions with deep pockets, Artificial Intelligence has been known for its use by retail giants like Amazon, Apple, Google and Netflix to gain insight into consumer behavior, and by top portfolio managers and hedge funds to gain an edge over the market.

As Advisor Authority shows, today the most successful RIAs and fee-based advisors are now strategically adapting their practice by adopting AI. Successful advisors use Artificial Intelligence to understand client behavior and predict clients’ future needs. It helps them transform every aspect of the customer experience, from the front-end to the back office, opening the door to an entirely new category of client and offering a new universe of products and solutions. In fact, the vast majority of successful advisors (81%) are far more likely to believe AI will improve the advisor/investor relationship—and more than three-fourths of successful advisors (79%) say the integration of AI will give them a clear advantage over the competition.

Adapt to the Power of Consumer Demand

This year’s Advisor Authority shows that successful advisors make it their priority to adapt to consumer demand. The most successful advisors know that putting clients first is fundamental for the growth, health and profitability of their practice. By understanding what matters most to clients and aligning with their wants and needs, successful advisors earn their clients’ trust, deepen the advisor/investor relationship—and ultimately bring on more assets under management.

Change happens! Ten years ago, the country was rocked by a financial crisis that undermined trust in financial institutions and the professionals in our industry. Today, investor confidence is getting stronger and the most successful advisors are among those leading the charge to break down the barriers and build greater trust...

Start with holistic planning. Year-over-year Advisor Authority has shown that investors consistently rate personalized advice for holistic financial planning among the top three most important factors for choosing an advisor. The most successful RIAs and fee-based advisors understand that this must be customized, comprehensive and balanced between competing priorities. This includes managing the client’s portfolio and their taxes, managing their expenses and debt, helping them to prepare for and live in retirement, while also considering the needs of their entire family—from long-term care for aging parents, to funding children’s education, to leaving a financial legacy.

The most successful advisors also say consumer demand for lower costs and transparency is the number one factor driving fee compression in our industry. Clients benefit as the cost for transactions and services continue declining to unprecedented lows. These savings go right back into their portfolios—or straight into their pockets. So be rigorous about cutting costs in the products you choose and through the technology you use. Be crystal clear in the fees that you charge—and the reason you charge them.

And as successful RIAs and fee-based advisors know, it’s important to remember that you can’t win on performance alone. The most successful advisors are masters of specialization. Become the trusted counsellor on volatility, protecting clients from emotions and keeping them focused on long-term goals. Become the subject matter expert, with a unique specialty based on clients’ generation, profession or lifestyle. As many successful advisors say, the advisor who tries to serve all clients end up serving no one.

Keep Pace with the Push of Regulatory Reform

Where the power of consumer demand meets the push of regulatory reform, the fiduciary standard comes to the forefront—and there is no turning back. Year-over-year Advisor Authority has shown that investors consistently rate a fiduciary standard among the top three most important factors for choosing an advisor. And nearly half of investors (48%) say they would stop working with an advisor who is not required by law to serve in their clients’ best interest.

While the DOL, the SEC and various states are all engaged in defining and implementing their own version of a fiduciary standard, successful advisors, as compared to all other advisors, are far more likely to strongly agree that there should be one federal fiduciary standard across the financial industry (53% vs 35%). The simplicity and transparency of a uniform standard of care allows successful advisors and their clients to make more informed decisions when working towards financial goals.

Successful advisors are also more likely to take action on tax reform. In December 2017, Congress passed the Tax Cuts and Jobs Act, one of the most dramatic reform packages in nearly three decades. It made significant changes to individual income tax, changed the standard deduction, levied new limitations on itemized deductions and reduced income tax rates, according to a summary from the Tax Foundation.

Successful advisors, compared to all other advisors, are far more likely to strongly agree that the majority of their clients will benefit from tax reform (45% vs 28%).  Likewise, nearly twice as many successful advisors strongly agree that they will adapt their investing approach based on tax reform, compared to all other advisors (42% vs 23%).

Adapt Traits and Trends that Drive Success

Change happens. Ten years ago, the country was rocked by a financial crisis that undermined trust in financial institutions and the professionals in our industry. Today, investor confidence is getting stronger and the most successful advisors are among those leading the charge to break down the barriers and build greater trust. And as Advisor Authority has shown, year-over-year, investors who work with advisors are more confident in their financial future that those who do not.

Successful advisors put clients first and keep client satisfaction up while confronting persistent downward pressure on fees. They manage fast moving markets by mastering even faster moving technology and harnessing the benefits of Artificial Intelligence. They remain nimble and poised to pivot in a political and regulatory environment of the unknown and the unprecedented.

Ultimately, the most successful RIAs and fee-based are forward looking strategist who accept change as their most important ally to drive greater growth, manage more AUM and earn more than their peers. All advisors should take a page from their playbook.◊