How Firms Can Evolve for the Future Before It Arrives

Management

Jackson and Veres’ research found a theme in the leadership structure of firms that were at or approaching peak two.

Advisor-owner CEOs took on a visionary, “out ahead” role. They weren’t slowed down by the logistics of implementation and were a step away from direct contact with clients, instead looking at “where the puck is going” instead of where it’s been.

Implementation became the purvey of a manager. As the CEO is free to brainstorm and vision-cast, they can pass on ideas to the manager who breaks them down into concrete processes for the team. A vision becomes a plan, which is part of a strategy, which leads to a result.

Rarely is this process clean – with CEOs doing some implementation and managers chiming in on vision – but in the future, this process will be more defined. One of the keys for our growth at Altfest Personal Wealth Management was to professionalize the management by having a COO who could work on these processes. This freed up leaders to lead and advisors to advise.

The offering

The boilerplate offering for an advisory firm reads something like: “Comprehensive financial planning and investment management for people with assets over X.” This is common language, but not particularly clear.

Peak two advisors are clear about who they want to serve. They’ve chosen their niche. Even if they don’t strictly limit themselves to it, they make it prominent.

Our firm does a lot of work in the healthcare niche, which has its own goals and pressures. For example, this year we have been working with Paycheck Protection Program loans to keep small practices going.

Our technology platform helps us to scale and customize our advice according to who we’re working with and their specific needs, which helps us get to peak two in this area.

Marketing

Peak two firms are aware of the social media-saturated world in which they operate. If a prospect wants to know who you are, they will check you out on Facebook in about five minutes.

The old head-and-shoulders shot with a bio listing degrees is cliche. Marketing of the future will be personalized.

The shift is from the over-polished to the authentic, with each advisor cultivating their own brand personality. A peak two bio will list your licenses, but also your favorite vacation spot and how many kids you have. As you open up to your clients, they will open up to you about the help they need and their aspirations.

You create a brand that is hard to compete with because no one else is you.

Technology

Innovation will come from advisors who know their clients’ pain points firsthand and want to address them directly.

Third-party vendors create technology for an audience that already exists, which usually places them squarely on peak one. Peak two innovation comes from seeing problems before they escalate and designing for the paradigm before it shifts.

My firm developed its technology by looking for a way to scale holistic planning. With the whole team painstakingly involved in gathering data from wills, trusts, tax returns and insurance policies, and then finding all the high-impact-advice opportunities, our options were to stop growing or find a way to scale. We couldn’t find anything, so we created it.

The paper described our process in this way: “Andrew Altfest is a classic peak two entrepreneur. He noticed a challenge – the automation of investment management by robo-firms – and decided to solve it himself by one-upping the competition with a self-developed financial planning software.”

We used artificial intelligence (AI) to extract relevant information from client documents and combine the analysis with algorithms created by a cross-disciplinary team of 40 subject-matter experts. The results are actionable planning recommendations customized for that person according to their wealth and life journey. The advisor can make those recommendations in a fraction of the time and integrate them into the client’s overall plan. It is completely complimentary to financial planning software.

If I take the liberty to use Bob and Matthew’s parlance and extend it based on my views, what we would find is:

Peak one financial planning software would include lots of data entry, is manual, time consuming, and limited to the proficiency of the particular user. More output equals more time spent, so it has to be rationed. The scope of planning is thereby often limited to specific problems like retirement spending analysis.

Peak two financial planning software is AI-driven, smart and holistic – it is highly automated and powered by the intelligence of the software. The old rules and limitations no longer apply with technology allowing us to do today what wasn’t possible before.

Built by advisors for advisors

Veres and Jackson talked about advisor-created technology like ours, where an advisor saw a problem and addressed it with an integrated solution that allows for customization. Legacy systems work in silos that have difficulty communicating with each other, and this necessitates having a coding expert come in to fix issues and tweak the process, which slows the whole thing down.

They see the firms of the future working with integrated solutions, which blend the functionality of data entry and planning recommendations, rather than a half dozen legacy systems that don’t communicate with each other easily. Solutions like ours are created by advisors for advisors in a simplified, elegant platform that accomplishes several processes at once.

Empowering young innovators

The paper also points out that much of the tech innovation in the industry that’s working comes from younger advisors. The way for firms to avoid becoming dinosaurs like Blockbuster and Kodak that ignored paradigm shifts and went obsolete is to dare to empower their younger advisors to think outside the box.

Here’s the part in the paper that resonated with me about this movement: “Logically, today's most innovative firms in the technology space – FP Alpha, RhineVest, Elements and Facet Wealth to name but a few – are almost without exception the work of younger advisors.” Here at Altfest, we’ve had the stability of a standing practice with the space and resources to innovate simultaneously – the conditions that allowed our technology to evolve.

This is peak one to peak two work, which goes through the rigors and disorientation of the adaptive valley. But the firms of the future will dare to blaze a trail before it becomes a crowded highway, and therefore be the first to reach the peak two summit.

Andrew Altfest, CFP® is the president of Altfest Personal Wealth Management and founder and CEO of FP Alpha, the software his firm developed and now offers commercially to other advisors.

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