Looking to the US for a guiding light

The Australian financial planning industry has a history of following some of the major trends emanating from the United States. In the hope of gaining an insight on where our industry is heading this year, Gerard Doherty presents his observations gleaned from a recent trip to the US.

There is a large body of evidence to suggest there are two priorities for financial planners in the coming year. These are managing progress by harnessing the continuing wave of technological developments, and developing, then communicating, what it is their organisation does that adds value for their clients.

To me these are the two critical areas for everyone in the financial services industry, not just financial planners. Restructuring and reorganisation, enabled by new technology, will be routine throughout the coming year as organisations continue to redefine their business so that they can focus on their business strengths.

If financial planning firms do not harness technology correctly, and by correctly I mean in a way that adds value to the services provided - through the Internet, on-line trading tools and even the telephone - they will find that they will be left behind with little chance of growing their business.

There can be no doubt that the marketplace for financial planners, and therefore their opportunity to increase revenue, is poised to grow dramatically in 2001. The coming year has every sign of being a watershed year for growth in the adviser business in Australia.

The indications are that many more people should be turning to financial planners for advice during the coming year. These include do-it-yourself investors who have now accumulated a reasonable asset base making them more concerned about their investments and the potential cost of a wrong decision.

In the US, the trend seems to be that once people have more than $100,000 in investable assets they call out "Help me". It is the financial planners who make themselves accessible to these new markets that will see growth.

The most cost effective way of doing this is through technology and in the US many advisers are making big commitments to their Web sites to enable them to access these markets - which are frequently investors who are Internet savvy.

Astute planners are making a major commitment to the Web in a way that adds value for the information providers. They are effectively becoming browsers for their clients. It is worthwhile checking some of the US adviser websites such aswww.joelisaacson.com,www.ferrincaital.comandwww.afawealthcomto see how effective interactive sites can be.

An advantage of attracting Internet-based customers is that once they get used to your Web site, they don't want to have to learn how to use other advisers' Web sites, so that it becomes a barrier to moving. However, it is important to show you can add value to attract the do-it-yourself Internet investor in the first place.

The commitment to technology must therefore be backed by a "know yourself" approach by financial planners. In the US, there is a big trend whereby advisers are defining what it is they do that adds value for their clients. This in turn has led to the emergence of consultants who will audit financial planning businesses to help the principals define where their value-add lies, and then to help them develop ways of communicating it to their market.

As the Australian marketplace becomes even more competitive, with fees under pressure and an increase in DIY investors, it is going to be increasingly important for financial planners to focus on their strengths, and I believe 2001 will be a make or break year in this regard.

It means that relationships will be even more important. Here I would prioritise two areas of relationship building. There are the relationships which allow networking to help develop new clients - and this includes relationships between advisers and other businesses such as accountants, lawyers, insurance experts, estate agents and the like.

The other area is of course with clients, where I see the trend developing where successful financial planners effectively become the chief financial officer for their clients, adding value to their financial affairs.

This will require a grading of clients so that the main efforts in maintaining personal relationships are targeted at the most profitable clients. At the same time, a full range of "passive" contact methods, such as seminars, newsletters and, of increasing importance, the Internet, need to be used to maintain contact and communicate with all clients, as well as attracting new ones.

Gerard Doherty is the head of retail business at Perpetual Investments.