Innovative US advisers are harnessing the power of technology to significantly out-earn their Australian peers, according to Santi Burridge, the chief executive of Implemented Portfolios.
“Your peers in the US are making twice as much as you are while servicing the client better,” Burridge says.
Burridge, who recently led an industry trip to the US’s innovation mecca, Silicon Valley, says the message from the fact-finding tour was clear: stop focusing on product, and instead focus on building scalable businesses that deliver brilliant client outcomes.
“With the product-based business model you have no scale,” he says.
Burridge outlined the lessons he garnered in Silicon Valley at the Independent Financial Adviser’s Association of Australia’s (IFAAA) Symposium held in Brisbane on October 28.
Burridge says it became clear on the trip that the financial services industry and advisers are facing a “well-funded attack on our industry”.
Silicon Valley is producing a range of tech-enabled solutions designed to attack advisers’ customer bases and undercut them significantly on price. The tech players are also prepared to lose billions to win market share.
“Technology is not our friend any more,” Burridge says.
“It’s shifted to wanting to take our clients. Silicon Valley is on the attack.”
Start-ups want to take your job
There are currently 16,800 start-ups in Silicon Valley and some 800 are targeting financial services. Through mass personalisation of advice, “they want to take our jobs and want to take our clients”, Burridge says.
Burridge says that for advisers to adapt and thrive amid the onslaught it firstly requires a mindset shift about what business advisers are in.
“We aren’t in the business of financial services any more,” he says. “We’re in the business of technology. We just happen to run financial services.”
“That is a fundamental shift that has to happen to all our business models. By using technology we can create a better profession and better outcomes.”
Burridge says the only game in town now is client service, and advisers need to “check their ego at the door”.
Advisers need to harness technology to produce better client outcomes, but to also create the scale needed to compete. Scale has to be the critical success factor, he says.
“Advisers need to create one scalable, consistent and individualised client experience,” he says.
To achieve this Burridge says that advisers need to “stop managing product and start managing systems”.
Advice is about service, not product
Advisers are in the service game, not the product game. Burridge says it became clear in the US that innovators were focused on using technology to exceed expectations around service.
“There was not one mention of portfolio performance,” he says.
It is more important to have a consistently implemented investment philosophy. But “it’s not about performance; it’s all about scale and exceeding the client’s expectations”.
To build their optimal service, Burridge suggests advisers create an “avatar” that looks like their perfect client, then design their service proposition around that avatar and focus on exceeding their client’s expectations around service.
Advisers need to replicate themselves through full back and middle office automation, but also create a fully automated front office on one integrated system.
Data is also critical.
“If you don’t control data, you don’t control the client,” Burridge says.
“You need to know everything about your client.”
Advisers who can serve 600 clients
Burridge cited Personal Capital as example of a cutting-edge technology-driven financial advice operation. Personal Capital’s advisers service 400 to 600 clients each, assisted by technology. Some 60 per cent of clients interact with mobile, statements of advice are automatically generated, and clients have tech-enabled quarterly calls with investment teams.
But, in general, US advisers’ financial performance is superior to Australian advisers.
Burridge says that in the US, the independent sector average EBIT margin is 54 per cent, whereas Australian advisers are operating between 20 and 30 per cent in the main.
“The only difference I can find is that the US advisers have put scale and tech at the core of their decision-making,” Burridge says.
“They’re focused on exceeding client expectations around service, and most importantly, have checked their ego at the door and run on consistent investment philosophy for all clients.
“Australian advisers have consistently been held back by principals who believe that part of their value lies in picking the next winning funds and stocks, client by client, and this is ensuring they don’t achieve their potential.”
