It’s funny how history has a way of repeating itself, how being exposed to one way of life can teach you something about another, sometimes decades later. However, to learn this lesson — and glean something from history — you must be willing to pay attention to the environment around you.
For me, the learning experience was farming in the 1980s and the Black Monday market crash of 1987. I experienced first-hand how a few well-timed events around the world can flip an entire industry, business and family upside down without any notice. It happened to my family and our farming business, and it happened with many of the families I served then, when I was just a few years into financial services.
Those events changed farming forever, but they also taught me a few valuable lessons as an adviser and CEO today: lessons that should serve as leading indicators for what lies ahead in 2019. Many of the developments I saw in farming then are what I see in financial services now. It’s almost eerie.
1. Stealth fee compression. The financial crisis in the ’80s left farmers all over the country in a margin-less business, with farmland values dropping 60% in some parts of the Midwest. Meanwhile, record crop production forced prices down, resulting in massive debt. Before you knew it, a third of U.S. farmers were in serious trouble.
The same margin compression is happening in financial services today. Advisers struggle more than ever to prove their value and justify their fees, while the cost of running a firm continues to rise. What are you doing to demonstrate value beyond a doubt? Is your business prepared for a market downturn? What moves can you make in 2019 to insulate your firm if factors outside of your control affect the bottom line?
2. Aging, exiting advisers. There are more advisers above the age of 80 than there are below 30. We could see more than 100,000 advisers exit in the next five to 10 years. Farming faced the same challenge in 1980s, and that opened the door for rapid industry consolidation as big farms swallowed up smaller ones.
Farming is the hardest way I know to make a living, which is why it was so difficult to introduce the next generation. We have no excuse. Our profession has more opportunity for next-gen talent than we know how to comprehend. Find ways to infuse young, bright people on your team in 2019. It may be the single most important factor for your firm’s relevance in the future.
3. Growing friction and rising consumer expectations. To really understand the friction occurring between independent advisers and the institutions that serve them, advisers must first know where financial services sits in the grand scheme of what the Harvard Business Review calls the “Consolidation Curve.”
The four stages — Opening, Scale, Focus, and Balance and Alliance — illustrate the process of maturing that every industry undergoes. Financial services sits right in the middle of stages 2 and 3, meaning the conditions are ripe for major players to emerge and ferocious consolidation to occur. Companies start to scale their offerings in response to increasing consumer demand and focus on expanding their core competencies.
So how will you meet the rising expectations of your clients in 2019, and what partners will you need in order to achieve that vision?
4. Does your technology have what it takes?Agriculture has undergone extreme changes in technology as the world demands more from fewer farmers. From autonomous tractors in the fields to drones monitoring crop yields, the agriculture industry knows it must adapt because it will need to produce 70% more food in 2050 than it did in 2006 to feed the growing population of the Earth, according to the UN Food and Agriculture Organization.
Just as farmers need to find ways of becoming more efficient and maximizing their output, so must advisers improve how they deliver value.
From financial planning software and robo-advice to better gathering and leveraging data to anticipate client needs, advisers have only seen the beginning. Assess your tech stack in 2019. Find an expert who can help identify gaps in your current offering and build a road map for how you can create an end-to-end experience for your clients.
Invisible influencers constantly and subtly shape our profession every day. The question is, can you identify those influencers and anticipate their effects before it’s too late? My hope for every adviser in 2019 is that you will.
Recognize where your business has room to evolve. Understand the fragility of our landscape. And always have your ear to the ground.