Last week, Independent Advisor Solutions by SEI held its 2021 Advisor Summit. We were all excited to welcome Marc Randolph, a co-founder and the first CEO of Netflix. His keynote presentation started with an amazing story about how Blockbuster, which was once the dominant video rental business with thousands of stores and $2.5 billion in revenue, turned down an opportunity to purchase Netflix for a mere $50 million. The story of what happened to Netflix was one of innovation and risk-taking — but more importantly, of ideas and listening to the consumer.
I think you all know the moral of the story. Today, Netflix has a market cap of over $221 billion, while Blockbuster has only one remaining store, located in Bend, Oregon.
I was fortunate to follow Marc’s keynote. Motivated, I started my presentation with a challenge for the audience: while many independent advisors in the audience may consider themselves a Netflix, I asked them to consider that they may actually be a Blockbuster.
Being independent and owning one’s own business doesn’t automatically make one innovative or entrepreneurial. In fact, most advisory firms still run on a very archaic and traditional business model that is designed for the convenience of the advisor, not the client. The advisor-centric business model, where the advisor picks the products, service model and compensation method still permeate our business, whether you are in a bank, wirehouse, Registered Investment Advisor, or are independent/Broker-Dealer affiliated.
Accelerated evolution of a business model
It is no secret that the financial services business is evolving and that the pandemic has only increased the speed of change. Consumers have seen just how easy it is to transact business, shop, and get personalized experiences in their homes.
As Marc said in his presentation, the video business was once locked in a distribution model that has been blown apart — and it won’t ever go back. For advisors, the traditional in-person annual review meeting is a thing of the past — permanently. Consumers now expect a customized, personalized, immediate and transparent relationship.
In order to seize this change, successful independent advisors have to focus on three things:
- Specialization – Firms that “swim in the sea of sameness” risk becoming marginalized and won’t be able to compete with larger “mega firms” or digital providers in the future. Firms that specialize by client type can position themselves as experts in the client needs and can anticipate unmet, unrealized needs. Marketing becomes more focused and stands out.
- Partnerships – You can create scale and expertise that caters to your targeted clients, without the infrastructure and overhead costs. It helps your clients and gives the appearance of a much larger, better-resourced firm.
- Integration – Tie it all together with an integrated technology stack that seamlessly allows for coordination, workflows, and most importantly, scale.
Ideas are only the first step
Marc told us there are no bad ideas. He also said that if we listen to our clients (customers), we will be surrounded by ideas all day long to improve their experience and innovate on what we do. The question is, can you take the next step and put your ideas into action?
As I observe the independent advisory business today, it appears to be at a crossroads; innovate or die a slow death. Regulatory pressures, changing client expectations, commoditization and competition will keep squeezing firms. Innovative firms will stand out and will continue to thrive. They’ll reinvent themselves based on client focus and a differentiated client experience. Innovative firms can build with scale and can embrace change.
Five ways to get started on your own innovative culture
Sitting back and resting on success could have been what happened to Blockbuster. Maybe they didn’t see the change coming. Netflix has continually evolved — from renting DVDs to streaming content to creating its own streamed content. The mindset of the startup and disruptor still resonates in its culture.
How can you look at your business and build your own culture of innovation? Frankly, it is easy but it takes focus. Try these ideas:
- Understand innovation. It is not just buying a new piece of technology. It is a mindset, a vision with a goal in place. It most certainly won’t be right the first few times. Innovation and testing come hand in hand. Test new ideas, new services, new partners. Fail fast and move on to the next idea.
- Look to your clients. Form an advisory board or focus group. Send out a survey based on your ideal or target client. Use personas to build out what they need today and more importantly, what they will need in the future.
- Appoint an innovation officer (maybe yourself). Put innovation on the agenda of your staff and offsite meetings. Hold the innovation officer accountable for coming up with ideas to test.
- Look to other innovators, and not just within the advisory business. Ideas are everywhere, just keep your eyes open.
- Hyperfocus on the client experience. We are in a service business, but those services can become commoditized and marginalized. Hyperfocus on creating a journey map to better understand the experience from the client's perspective — it’s absolutely the key to succeeding.
It is far too easy to sit back and consider yourself a success. Client satisfaction, a nice revenue stream, and a few referrals a year can lull you into Blockbuster-like complacency. But every day, innovative firms around you are waking up and trying to find a way to create a better client experience, a new way of standing out, or a differentiated way of delivering advice. Are you Blockbuster or Netflix?
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