There’s a lot of discussion lately about the disparity between the haves and have-nots, whether it’s about the wealth gap, with the top 1% controlling nearly as much wealth as the middle and upper-middle classes put together, or the separation between developed nations, which control most of the world’s financial resources, and the developing world.
We can see a very similar situation unfolding in the business world. Why do “new economy” technology firms receive higher multiples than “old economy” companies that live in a different world of single-digit multiples. Are there any lessons for financial services firms, and in particular independent wealth managers?
Services versus stuff
Yes, it’s true that many of today’s winners are tech-focused. But just as importantly, most of them present themselves as services companies, rather than being in the business of selling products.
We’ve seen legacy consumer product companies make efforts to move away from “stuff,” as they see that growth slow, and instead focus on “services,” sometimes through those gadgets. Many “old world” companies are now using this principle to reinvigorate their businesses and expand their growth.
So how does this apply to financial services? What should you consider if you are an independent adviser and want to thrive in the new services economy?
• What you sell. Most of us deliver a financial plan, perhaps a portfolio of ETFs or individual stocks. The products themselves, like most “stuff,” are commoditized.
There’s not a huge difference between an Android phone or an Apple phone. The same is true