Your Business

How innovative advisers do their work

October 2016

Age and method don’t matter, it’s how you think that makes you innovative.

Innovative advisers use their people, tools and processes to make more money, reports Alan Hartstein

Financial advisers who implement innovative practices report 23 per cent growth in profits on the previous year (compared with 16 per cent for traditional advisers) and an average personal  income of $210,000 (versus $180,000 for traditional advisers).

The findings come from the ANZ Innovative Planner Report released earlier this year, following a survey by ANZ Wealth and market researcher Investment Trends to identify advisers who have adopted innovative ways of operating and to understand what makes them successful.

The research segmented financial advisers by their adoption of new approaches to engage with clients. Advisers belonging in the top two quartiles were identified as “innovative”, while those in the bottom two quartiles were referred to as “traditional” advisers.

Research found innovative advisers have 20 per cent more funds under advice ($57 million versus $47 million for “traditional” advisers) and acquire 50 per cent more customers each year on average than their traditional peers thanks to a better conversion rate. More notably, funds under advice tends to be higher even when accounting for differences in advisers’ age or when their practice was established.

Investment Trends research director, Recep Peker says “it doesn’t matter how old they are or how long they’ve been around, innovative planners were only marginally younger on average, which shows innovation can be agnostic of demographics”.

Innovation enablers

The second key finding from the survey is that there is no single process, methodology or framework advisers can adopt to instantly create a culture of innovation. Instead, it’s a mindset: look at things differently, challenge old processes and find new solutions. Small, incremental changes that are not difficult or costly to implement can achieve substantial results.

Innovative advisers attribute their success to increases in client referrals, business-growth strategies, widespread adoption of technology and more advisers joining their firm. They are able to optimise their firm’s potential in three main areas: people, tools and processes.

Innovative people

A new economy is emerging around customer personalisation. Like consumers everywhere, financial-advice clients increasingly want products and services that meet their specific financial goals.

Innovative advisers are adopting a range of personnel initiatives to facilitate this. They employ a wider range of support personnel (4.0 on average, versus 2.9 among traditional advisers) and are more likely to employ office managers and marketing and social media consultants.

Innovative advisers also take a more holistic approach to their clients, looking at every aspect of their lives, not just their financial situation. Clients want advice expertise based on understanding of who they are and what they want. Being able to segment them at a macro level into categories such as “high-earners” who want to sustain a particular lifestyle and “cautious investors” can help advisers tweak their service for optimal impact.

Innovative advisers are also active in extending the parameters of their client base and are willing to build long-term relationships.

“Unlike their traditional counterparts, innovators are more focused on the next generation of wealth builders and are willing to engage the 30-to-50 age bracket, as opposed to just focusing on the retiree and pre-retiree market, despite the fact that they might have less money to invest now,” Peker says.

Innovative tools

Digital technology is reshaping every aspect of the financial advice sector from the front to the back-end. While most financial advisers have begun adopting new processes to enhance client engagement, the extent of implementation varies greatly.

Technology allows client-centric advisers to engage clients via multiple touch-points and there is now an unprecedented number of tools at their disposal. Innovators use file-sharing programs such as Dropbox and Google Drive and budgeting/cash flow and customer relationship management tools more than their traditional peers. They are also keen adopters of programs such as Skype for online meetings and are more likely to have developed in-house proprietary software solutions.

Innovative advisers are also more likely to use tablets in their business meetings for client reviews, viewing client accounts/reports and new client meetings.

Innovative processes

Innovation is not solely about technology, many great innovations simply involve re-evaluating the way advisers conduct their business. An iterative process involving trial-and-error provides valuable insights. Advisers should constantly review the way they interact with clients and see how they can better help them. It’s much better to learn what’s working and what isn’t early and then respond accordingly.

As a small business, many advisers have a huge advantage. They can be nimble and adaptive in a way that a large organisation can’t be, but they need to accept the importance of an innovative approach to their business and ensure it remains a core part of their organisation.

Innovative advisers often engage in radical collaboration, co-designing solutions with clients and employees. But small changes can also equal big success: adopting a more client-centric approach, for example, can lead to more referrals.

“Innovation doesn’t have to be cutting edge. It can just mean using people and technology in a smarter way to become more client-focused,” Peker says.

“Some planners use marketing consultants but still use traditional software, whereas some have adopted file-sharing software. It’s all about finding what works for you in delivering the best possible client outcomes.”