In sport, the term ‘all-rounder’ is used to describe a versatile player, particularly a cricketer who’s got a good batting and bowling average.
Being called an all-rounder is meant to be a compliment; an all-rounder may not be exceptional at any single skill but they’re pretty good across the board.
Most financial advisers are all-rounders. They’re alright at finding new clients; they have a solid understanding of tax, social security, investing and life insurance; and they’re getting better at articulating their value.
If there is one area they shine in, it’s probably relationship management, which makes up for their limited business management abilities.
But is it enough to be a jack of all trades and master of none in today’s ultra-competitive financial services marketplace?
[Editor’s note: This is the fifth in a series of columns Barrett is writing exclusively for Professional Planner based on insights he’s gathered as an active acquirer and investor in advice practices.]
If you agree with the growing consensus that the advice firm of the future will closely resemble a professional services firm, characterised by a value proposition that requires expertise and specialist training, then many principals will need to rethink their business model.
They will need to hone their skills and choose an area to specialise in.
But which skills and what area?
Determining the right direction to take your business will be highly subjective and depend on factors such as what you’re good at, the tasks you enjoy doing and the resources available to build a sustainable competitive advantage.
There are two main questions that advisers need to ask themselves:
- What is my capability? (I.e. what is, or could be, my source of competitive advantage? What am I really good at?)
- What is my capacity to execute my capability? (I.e. How much can I produce and sell to my target market?)
A lot of attention is given to the second question, particularly by consultants and practice development managers, but advisers need to think more deeply about the fundamental question: what am I really, really good at?
More broadly, they need to ask: what is my team good at?
Once they reach a conclusion, they need to question again: Are we really good at that?
The uncomfortable truth is that advisers are typically generalists. They’re not particularly good at anything.
That’s not a criticism.
For many, being an all-rounder has been a winning strategy. In fact, it has been essential.
In the early days of establishing a business, principals needed to do a little bit of this and a little bit of that because they didn’t have the resources to hire dedicated staff to look after specific areas like marketing and operations.
However, too many advisers haven’t progressed.
Decades later, they’re still doing a little bit of everything, which is hindering business growth.
In an increasingly complex and competitive environment, professional advisory firms will need a point of comparable strength in order to standout and, importantly, charge a premium for their services.
If your answer to the question; what am I really, really good at, is genuinely nothing then ask yourself what could I be good at because you and your business will need to get really, really good at something fast.
If you can’t make a decision based on what you enjoy doing, think about the type of specialist advice that consumers in your local market want and need. Are there specific problems and concerns they’re grappling with?
Consider the existing resources and relationships you have access to, which could form the basis of a sustainable competitive advantage.
Existing connections and clients may provide clues.
For example, in our network there are businesses that look after farmers, teachers, builders, medical professionals, pharmacists and non-profit organisations. They have built successful businesses around an area of specialisation.
Other firms specialise in UK pension transfers, risk insurance advice, due diligence, aged care and workplace education.
It is no accident that we have invested in these specialist firms.
We’re not just interested in acquiring successful accounting and advisory firms, we’re looking to acquire capability. We want people and businesses that are specialists in their chosen field, demographic or location, and possess capabilities that our business community can leverage.
Examining the underlying performance of the 64 firms in our group’s portfolio, the top performers all have something in common: a clearly articulated point of difference, be that a demographic, location or area of expertise. Increasingly, the generalist practices in our network are reshaping their businesses to carve out their own niche.
Going back to cricket, there have been many great all-rounders in history. Names like Keith Miller, Ian Botham and Imran Khan come to mind. However, contemporary names are harder to think of. It’s much easier to spin off the names of excellent batsmen and bowlers.
Similarly, in financial advice, it’ll be harder and harder for generalists to standout and effectively compete. Continuing to be an all-rounder in an industry that is undergoing enormous change and disruption will only stifle growth, add complexity and exacerbate legacy problems that will ultimately need to be addressed.