By BRETT DAVIDSON
Have you got 2020 vision, or do you need to go to Specsavers?
2020 is going to be a huge year for all of us in the Financial Planning community. Change is accelerating at an accelerating rate. It's scary and exciting at the same time.
Here are three themes that I expect to be huge in 2020.
If you haven’t got a clear vision of where you want to be, and where you want to play in the future financial services world, it’s going to get tough.
Clarity of vision is always the starting point. And you can re-set and sharpen up your vision at any stage of your journey. I don’t care if you’re 35 or 65. If you own a Financial Planning business, you’ve got to be working as hard as you can to create a clear vision for your future.
Don’t get discouraged if you work really hard and all you come up with is a five out of ten vision. Sometimes that’s how it goes.
But don't stop there.
When your vision is not as clear as you’d like, keep digging. Read more books, listen to more podcasts, and seek out entrepreneurs and visionaries in whatever industry you can find them. In fact, spend more time looking outside the profession than inside it.
It’s not that someone out there has all the answers; that’s highly unlikely. What you will gain is a range of different perspectives that will help you connect your own dots as to where you want to position yourself for the future.
Looking for a starter? If you're looking to start your vision journey off with a bang, check out this amazing interview with Simon Sinek.
My second theme is experimentation; and no, I'm not promoting alternative lifestyles.
What I am promoting is the need for successful firms to start experimenting with new business models aimed at serving younger clients.
I’m talking about large, experienced and successful Financial Planning businesses that have been built on the back of retirement planning and wealth management advice, deliberately moving into new client segments who have less money.
Not at all.
In the US, major and credible industry players like Schwab and Vanguard have their own direct-to-consumer advice offerings. These approaches are what is termed ‘cyborg advice’, a mix of robo and human adviser.
For now, the full-service Financial Planning model adds more value than these other approaches. Nothing to worry about, right?
I'm not so sure.
Clayton Christensen described the situation we might be facing in his book The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, first published in 1997.
"Christensen demonstrates how successful, outstanding companies can do everything 'right' and yet still lose their market leadership – or even fail – as new, unexpected competitors rise and take over the market."
Toyota vs. "The Big Three"
One example of an unexpected success was Toyota entering the US car market in 1957. GM, Ford and Chrysler were the big three carmakers. Was Toyota a threat?
Not at all, in the minds of the established players. Toyota made small fuel-efficient vehicles for the Japanese market. The big three made much larger vehicles for the US market where fuel was cheap.
Toyota came in and dominated the small car end of the market, with no resistance from the big three. In fact, it would have been silly for the big three to compete in that space.
However, once Toyota owned the small car space, they could work on competing in the mid-sized vehicle space, which they did. They eventually launched premium brands, like Lexus, and competed there, too. In 2008 they became the number one carmaker in the US.
You can see Christensen’s premise at work. It was the ‘right’ decision not to compete with Toyota and their small cars. However, failing to do so gave Toyota their foothold in the market.
"Christensen discovered the new technologies that had brought the big, established companies to their knees weren't better or more advanced, they were actually worse. The new products were low-end, dumb, shoddy, and in almost every way inferior. The customers of the big, established companies had no interest in them, why should they? They already had something better."
Source: Larissa MacFarquar, The New Yorker, May 7th 2012
Are we missing something?
Are we facing our own innovator's dilemma in Financial Planning?
Yet one can see these other players gaining a foothold. How long before they start to move up the levels, and threaten our cottage industry made up of comparatively unproductive smaller firms?
Christensen suggests some things incumbents can do to stay relevant and remain competitive against disruptive technology:
Develop your own disruptive technology with the 'right' customers. Not necessarily your current customer set.
Place the disruptive technology into an autonomous organisation that can be rewarded with small wins and small customer sets.
Fail early and often to find the correct disruptive technology.
Allow the disruption organisation to utilise all of the [existing] company's resources when needing, but [be] careful to make sure the processes and values are not those of the [existing] company.
Source: The Investor's Dilemma: When New Technologies Cause Great Firms to Fail
3. The Great Leadership Divergence
My third theme for 2020 is this: Generally speaking, we’re an industry of 50 or 60-somethings running businesses built on retirement planning to the baby-boomers. (Weren’t we born at the right time? – lucky us)
And while that trend hasn't run its full course, it's making us complacent.
If you’re a business owner who wants to carry on leading your business well into the future (regardless of your age), then you’ve got to have an eye on “what happens next?”; and it’s not more of the same. As I alluded to in my previous trend, “Experimentation”, if businesses want to:
…then they will have to embrace an openness to learning and new ideas. More of the same will not be fit for purpose in the next decade.
If you’re just seeing out your time at the end of a long and lucrative career, maybe you can get away with not doing any of the above. I say maybe, not to generate some sense of foreboding, but simply because I don’t know how quickly things could change.
It's good to be alive
I've got no more insight than you do. What I do know is that it has never been a more exciting time to be involved in the Financial Planning profession.
What are you planning for 2020?
Let me know how you go.