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In a world of constant change, financial planners face a whirlwind of upheaval. Vendors pitch their ever-expanding array of technology solutions. Regulators debate new rules. And consumers increasingly ask, "Are you a fiduciary?"
Amid this complex landscape, advisors must devise ways to differentiate their offerings, boost their visibility and deliver exceptional client service. If they do all those things — and marshal their limited resources for best results — they are well positioned to thrive in a hotly competitive financial advisory marketplace.
For many advisors, standing apart from competitors boils down to a deceptively simple challenge: communicating what they do in a clear, compelling manner. Consumers may not know what differentiates financial planners, financial advisors, wealth managers, brokers and investment counselors from each other. It's up to providers to define what they do and how it benefits the client.
An advisor's age and outlook also comes into play. Those nearing retirement — the baby boomers — often build deep wellsprings of goodwill with longtime clients and their families.
Younger entrants into the financial planning field bring a different perspective. Raised as techies, they may relate especially well to a rising generation of digitally dependent wealth creators.
"It used to be that you'd differentiate your firm through the amount of assets that you managed," said Brian Hanks, a certified financial planner in Boise, Idaho. "Now you see more firms focusing on a specific niche, and charging for advice separate from assets under management."
Once they identify a target market, advisors often head off competitive threats by emphasizing their commitment to comprehensive financial planning. Promising to deliver more personal service, from helping newly married couples set household budgets to coaching midcareer professionals to ask for a pay raise, enables advisors to add value above and beyond investment management.
To fend off competitors, advisors rarely try to beat investing benchmarks or showcase their stock-picking strategy. Instead, they probe to determine a client's objectives — both personal and financial — and present themselves as partners on the road to goal attainment.
On the regulatory front, the Labor Department's fiduciary rule — scheduled to go into effect in April — appears in doubt as the Trump Administration reviews it and other federal rules. Whatever the outcome, many consumers now have a heightened awareness of what constitutes a fiduciary.
"If the rule takes effect, there will be more competition with more fiduciaries out there," Hanks said. "But for those of us who are already fiduciaries, we can then say that although other advisors have started to follow the standard, we've done it all along. They have to change to comply with it. We don't."
Hanks, 36, launched his firm in 2012 after starting his career in Goldman Sachs' Private Wealth Management program. He recalls that "competition was fierce" to win a new client.
Now that he's on his own, he can woo newcomers to his small practice who are weighing whether to sign on with a big bank or brokerage. He emphasizes his personal service and "very visible pricing" structure.
"With the exception of those with a personal connection to a brokerage firm, I've won over these prospects every time," he said. "That's when the ex-athlete in me kicks in. I want to win."
Like many advisors, Hanks researches his rivals. He knows what services the big firms provide and their compensation models, but he avoids trying to compete on fees.
The growth of robo-advisors further dissuades advisors from attempting to undercut competitors' investment management fees. Many planners fear a race to the bottom.
More than ever, advisors seeking to best the competition adopt a holistic approach in serving clients. By taking a multifaceted view of an individual's present and future financial health, these advisors solidify their role in the client's life.
"It's more challenging for those advisors who just focus on the pure investment management function," said Kevin Keller, chief executive of the CFP Board in Washington, D.C. "Investment management is being commoditized."
The most loyal clients derive a high level of value from their advisor and become a rich source of referrals. From tax planning to insurance shopping, they look to their financial planner as a trusted guide.
"It's important to align in the client's mind the value of what they're paying for with what they're getting in return," Keller said. For those advisors who base their fees on the size of a client's assets, he warns a "mismatch" can arise between what they charge and the perceived value they provide.
Advisors with decades of experience sometimes fret about competing with tech-savvy millennials with generational links to potential high earners across different industries. Millennials who launch independent practices may operate from a home office, embrace digital marketing and welcome clients far beyond traditional geographic boundaries.
Increasingly, advisors of all ages are staying ahead of competitors by tracking the latest findings of how investors' attitudes and actions affect their decisions. Breakthroughs in behavioral finance add a layer of psychology to advisors' communication with clients.
"Advisors should seek out opportunities to participate in continuing education that focuses on behavioral finance," Keller suggested. "The role of client psychology is so important. It's not just the plan; it's understanding the human psyche and how to get your client to implement that plan."
Advances in technology help advisors sharpen their competitive edge. Vendors offer software and other products that boost administrative efficiency, simplify compliance functions and collect and organize client data. Advisors with easy-to-use online portals provide an appealing interface for clients to track their portfolio, ask questions and access educational content.
But technology alone can't supplant an advisor's ability to forge a lasting, personal bond with clients. This human connection is the ultimate differentiator in outlasting and conquering competitive threats.
"I've been in the offices of some of the best financial planners in the country," Keller said. "They understand that technology doesn't necessarily replace humans, but it replaces activities. What makes them the best is their outstanding rapport with clients. They've built lots of trust with clients, and they get them to act on their advice."