Prt 2 Advisor Relevance: Today and Tomorrow

SPONSORED BY
For professional use only. Not for distribution to the public.
Copyright © 2016 Cannon Financial Institute
Paper #2:
A Solution System:
SOLVING FOR COMPLEXITY REQUIRES
A NEW PERSPECTIVE
Financial Advisors: Relevance
Today and Tomorrow

Copyright © 2016 Cannon Financial Institute2
Cannon Financial Institute presents a 3
position paper series titled: Financial Advisors:
Relevance Today and Tomorrow. These papers
explore six challenges placing advisors at risk
and how adding 3 new capabilities can move
advisors from being threatened to thriving in
the face of disruption. The combination of
these 6 challenges is massive and analogous
to an avalanche, which changes the landscape.
However, with change comes opportunity and
those who are prepared can achieve greater levels
of success. This series reveals how advisors can
adapt to the shifting landscape by adding to their
existing expertise and succeed in the emerging
environment in new and exciting ways.

Copyright © 2016 Cannon Financial Institute 3
A Solution System:
Solving for Complexity Requires a New Perspective
This is part 2 of Cannon Financial Service’s series Navigating Challenges and Consequences-
Financial Advisors: Relevance Today and Tomorrow. In our first paper, we identified 6 challenges
advisors need to address in order to remain an important component of the financial services value
chain. These 6 challenges are occurring simultaneously and interacting to create a single confluence
of systemic change that is not responding to the discrete solutions offered for any one challenge. This
second paper will present our perspective on what is required and a framework on how to create
a solution system that solves for the systemic whole and enables advisors to build the capacity to
remain aligned with client needs and preferences even as they exist in a constant change state. In
our third and final paper we will present a solution knitting the pieces into actionable steps that,
when completed, create the solution system that is effective in resolidifying the advisor’s place on the
financial services value chain.
The context for the solution system
To appreciate the power of our holistic solution system, it is important to recognize that the new
rests upon the old – it does not replace the old. Advisors are adding several new competencies (like
adding the capabilities of a clinician to the technical role of financial advisor) to deliver the new
value promise. These additions make the role more engaging, exciting, and more meaningful to
advisor and client alike.

The knitting together of these new and old skills, activities, and the processes and tools to make
them work together creates the solution system necessary to solve for the systemic challenge. In
addition to the advisor technical competencies of wealth knowledge, sales and marketing, disciplined
practice routines, and tools, the new wealth advisor will need these new abilities:
1. Behavioral Coaching which requires knowledge and application of Behavioral Economics,
Emotional Intelligence, Life and Executive Coaching techniques, and an orientation to Goals
Based Planning.
2. Incorporating Innovation as a strategic approach to managing the practice: including the
use of Iterative Innovation (as a replacement to Strategic Planning), and the ability to design
Business Models to create competitive advantage and absorb disruptions from consumer
preference changes and competitors.
3. Exploiting Technology to create consistency, scale, and efficiency: understanding that the
integration and automation of workflows, tools, and systems is the foundation and only way
the advisor can create the capacity to operate as both the technician and clinician is central to the
premise of a solution system approach to successfully deal with our six converging challenges.

To create our solution system, we will look at each of the six challenges presented in paper 1 and
connect them to these three new competency domains. Doing this showcases the interconnectedness
of the elements within the solution system.
Solving for Challenge 1: The destruction of the old
value promise
With the destruction of our current value promise, advisors must not only
acquire the ability to deliver on the ideas presented in our solution system
approach but also be able to create new value promises in the future. The pace
of change will not slow down, and what must be adopted now will require
constant assessment in order to stay relevant in the future. The old value
promise is now provided by hundreds of sources for free 24X7, destroying the
foundation of our current business model. We must expect each time we craft a new value promise
that at some point it will be disrupted. The successful advisor must add the ability to constantly
explore what new needs the market has as old needs are eliminated and find new ways to meet them.
Our approach to create this competency to evolve our value promise is influenced by John Kotter’s
work on innovation and strategy published in the November 2012 HBR Change Faster, How to Build
Adaptive Genius in Your Organization. An expert in the field of leadership and change management,

Solving for Challenge 2:
New market segments are emerging
As Baby Boomers move into a new phase of life, the market we were accustomed
to serving is disappearing. Not because Boomers are realizing the inevitability
of mortality, but because they are creating a new definition of what their
generation requires. Gen X and Gen Y investors are emerging as wealth creators
on their own, providing exciting new opportunities for advisors. Though it
may be hard to recognize the morphing of the market you once served, the
signs are all around you. Just listen to the conversations you are having with Baby Boomers moving
into this new phase of their life. The trade press and industry whitepapers, blogs, and thought
Kotter says, “Today companies must constantly seek competitive advantage without disrupting daily
operations…Strategy should be viewed as a dynamic force that constantly seeks opportunities,
identifies initiatives that will capitalize on them, and completes those initiatives swiftly and efficiently.”
Our solution system requires that advisors incorporate innovation practices. We suggest advisors
embrace change via a methodology we call “Iterative Innovation” which combines determining
client needs and being aware of new concepts or unfamiliar products or services entering the
industry. This effort is most successful when several advisors commit to share with each other their
observations, explore implications, and brainstorm ways to take advantage of these insights. We have
labeled this practice management activity an “Innovation Incubator.” Once an issue is identified, a
solution needs to be created which is either an improvement to an existing business model or the
creation of a completely new business model. A modeling effort allows testing of the solution before
wholesale commitment is made. For further reading
on business modeling, read Alex Osterwalder in The
Business Model Generation Canvas. It provides the
rationale, steps, and insight needed for any advisor to
easily engage in business modeling without the need
for formal business school training.
Using these tools, advisors can successfully deploy multiple business models to create significant
long term competitive advantage.
Our industry is changing – and with it our business models need to change. This specific challenge
will always be with us. However, those who learn this skill and install “Innovation Incubators”
and an “Iterative Innovation” process as a part of their routine activity will have the best chance to
succeed as the pace of change in our environment accelerates.
Our industry is changing – and
with it our business models need
to change.

leadership are full of ideas that 10 years ago were not even in the fringe lexicon of areas of expertise
advisors should consider to fully serve this market. These new emerging client segments are creating
incredible opportunity for those who are able to move
out of a single focus client experience delivery model.
A fast changing marketplace is a relatively new
experience for those advisors with over 10 years
tenure in the business (the vast majority of advisors
today). However, the ability to cluster clients in new
ways, for example by service preferences, behavior
characteristics, or product set associations, will
create even more segmentation opportunities using
technology that is getting better and cheaper every day.
New technology even allows firms to survey the landscape in your
market, analyzing websites, social media and collateral material, creating
a visualization of where each of a firm’s key competitors are claiming
territory in a firm’s market. This allows advisors to hone in on the right
messaging to truly create a connection that resonates better than other
competitors, presenting your competitive advantage, rising above the
noise. Firms are able to stay abreast of emerging customer segments and
potential competitor threats.
Our Solution System, with its Innovation activities, takes advantage of emerging client segments by
understanding their unique needs and preferences then building business models tailored to those
needs.
Our Solution System, with its
Innovation activities, takes
advantage of emerging client
segments by understanding their
unique needs and preferences
then building business models
tailored to those needs.

Solving for Challenge 3:
New definition of who is the client
As the Greatest Generation and the front end of the Boomer market move
through the life phases of retirement and end of life, new insights and patterns
are emerging. Particularly, previously uninvolved spouses and adult children
are becoming more engaged in wealth management as the efforts of financial
planning and decisioning transfer to them.
Some families are already engaging all their members in the wealth management process. The
advisor’s ability to help clients recognize the benefits of proactive engagement of all generations
can be a differentiating factor for practice growth and
increasing the equity value of the practice.
Our Solution System requires involving all family
members in the wealth management process, which
benefits the advisor and the client family. For the advisor,
it means an improved connection and relationship with
the female spouses or partners, reducing the likelihood of
account transfer upon the death or incapacity of the male
partner. It also increases the likelihood of the advisor
developing a relationship with the adult children and
capturing revenue streams for years into the future.
For the family, it means maintaining one core relationship
and not having the difficulty of finding a new advisor
upon the death of a loved one. In addition, it reduces
stress and increases peace of mind for family members
that need to make decisions in the event of the incapacity
or death of a loved one – they are already aware of the
wishes of the client. For the patriarch afraid of “losing
control,” the advisor’s ability to use behavioral coaching
skills can provide a new perspective of including family members earlier in the planning process,
alleviating that fear. Finally, family members are educated and prepared for their inevitable roles.
The family therefore is in a solid position to face the eventualities of life.
The Solution System also requires the ability to deliver to individual family members the new value
promise. New business modeling expertise allows the advisor to craft profitable offerings for each
generation, and the deployment of integrated technology, specifically the automation available from
The advisor’s ability to help
clients recognize the benefits
of proactive engagement
of all generations can be a
differentiating factor for practice
growth and increasing the equity
value of the practice.

the client engagement platform, provides the scale needed by the advisor to offer and deliver unique
client experiences for each member of the family.
Advisors and client families will reap significant rewards as the advisor builds the competency to
think of and serve the whole family as the client.
Consider the following hypothetical illustration of fees maintained across generations.
Economic Value of a Married Couple with 2 Children
$50,000
5 yrs 10 yrs 20 yrs 30 yrs
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Primary
Wife
Children
Family
Fee Income
• $5,000 p/y Primary
• $3,000 p/y Spouse Retired
2 Children
• $1,500 p/y 2 Children
• $3,000 each Young Adults
• $5,000 each Mature Adults
TOTAL ECONOMIC VALUE
OF RELATIONSHIP
Primary only
5 years = $25,000
Family
30 years = $350,000
Solving for Challenge 4: A new value promise
emerging and moving from technician to clinician
Bespoke Solutions that fulfill the financial goals created from a deep
understanding of the client and client’s family aspirations come from capturing
more than the facts of a client’s situation. The clinician’s value is helping the
client explore possibilities, adding perspectives that open up options and help
create insight into the clients’ motivations and aspirations. The ability to help
clients set financial goals based on their unique set of life priorities generates
the bespoke solution which, by definition, cannot be commoditized.
Our Solution System requires an understanding that the advisor’s move to clinician is realized
through Behavioral Coaching which creates long term value. Knowing the client’s behavioral
tendencies and being aware of when they will come into play means that the behavioral coach can
design interventions that produce better results for the client and all the family members.

Advisors serving as technicians to provide holistic wealth management and clinicians using
behavioral coaching creates the new foundation for the advisor’s business model.
To learn about what clients really value, let’s turn to a study from the Financial Planning Standards
Council of Canada titled, “Focused on Client Results” which showed a link between clients with
advisors and a plan and a reported improvement in quality of life, emotional state, emergency
preparedness and preparation for retirement. Clients value peace of mind, guidance, connection of
financial goals to the meaning of their life, and an experience of shared purpose, guided activities,
and coaching to achieve results.
Our Solutions System requires advisors to reexamine where they attach their fees. Now is the time
to close the umbrella of Assets Under Management fees which had been cloaking the cost for other
services. There are significant revenue streams and fee models that can be matched with product
and service sets, which will be appealing to consumers. The business modeling tools in our solution
system create opportunity to design and test these models to ensure advisors never over-serve clients
so relationship profitability is maintained, and clients are never underserved thus paying only for
what they need and appreciating the value they receive.
The ability of the advisor to move beyond the technical activities related
to portfolio management and financial planning and expand to include the
clinical skills of financial life planning and behavioral coaching align the
advisor’s new value promise and pricing models with what the client of
today deems valuable.

Solving for Challenge 5: Disruptive technologies create
new opportunities and comprehensive business systems
are the backbone of the solution system
Technologies, specifically CRM systems, now allow bespoke experiences to be
crafted without difficulty. These experiences can be matched to the bespoke
solution set. In effect, bespoke fee structures can also be automated.
Our Solution System requires advisors to leverage technology to create
the delivery system for the product and service sets designed for each client
segment and customized for each client. Core to existing back office technology and CRM capability
that automates workflows, an additional system, the client experience platform must be put in place.
This platform has a backstage component to hear and understand the client and the front end to
engage with the client through the client portal.
The backstage capability of the client experience platform provides advisors unprecedented access to
client insight. There are two critical technologies associated with the backstage.
First, automated marketing systems and social media
monitoring systems must be combined. Social media
monitoring technology surveys what clients are telling
the world is important to them and sends the results to
the automated marketing systems. Clients then receive
targeted messages to visit their client portal to explore
real-time helpful resources. The second part requires
technology that can assess and predict investor behavior.
Behavioral coaching technology, with the capability to
suggest behavior modification and recommend risk
mitigation efforts in real time, creates added dimension to
the value promise. Tools such as DNA Behavior’s Market
Mood technology are already providing this to advisors
across the world.
The front stage of the client experience platform includes
the client portal. The portal’s capabilities provide a 24X7 virtual advisor presence. The portal means
the advisor’s value is available whenever and wherever their client needs it.
These portals are steadily
improving and redefining the
nature of the client-advisor
interaction.

For clients, these systems are able to provide a personalized experience of just-in-time client
education, real-time planning, and goal tracking via these powerful client portals. These portals are
steadily improving and redefining the nature of the client-advisor interaction. For the advisor, as
automation becomes embedded into the client portal experience, the portal becomes a significant
part of the advisor’s profit module. This gives many clients simultaneous access to content based on
their specific interests, and increases advisors’ scale and speed to advice in real time.
Solving for Challenge 6: Tenured advisor retention
The evolution of moving from a technician to a clinician is profound. Many
advisors sense that their technical work generates emotional well-being.
However, moving to a position of clinician is a fundamental change in approach
to serve the market, and there are specific and rigorous skill sets to master in
order to provide behavioral coaching to a family.
Our Solution System requires moving tenured advisors to a
position where their value is transformed to take advantage
of their accumulated knowledge and experiences and asks
them to occupy a new place in our industry. This is the place
where the attained wisdom of these advisors is deployed in
the solution system. This new role of clinician becomes a way
to realize a new level of meaning and purpose in the advisor’s
life at the same time they are helping the client realize the
same thing.
The skills and activities of our solution system address the
emerging challenges of client perceived value and changing
consumer preferences. As tenured advisors move to a position
of behavioral coach and counselor, the role of technician can
be filled by new advisors entering our industry. This gives
younger generation advisors the opportunity to learn and fill
the technician’s role, while observing the art of relationship
management which include the nuances of constant discovery
and behavioral coaching to ensure great results.
This of course helps solve for the industry issues around how to onboard new advisors in a
productive and relevant manner while at the same time keeping our tenured advisors motivated and
inspired by their new role so they stay engaged in our industry.
As tenured advisors move to a
position of behavioral coach and
counselor, the role of technician
can also be filled by new advisors
entering our industry. This gives
younger generation advisors
the opportunity to learn and
fill the technician’s role, while
observing the art of relationship
management which include the
nuances of constant discovery
and behavioral coaching to
ensure great results.

Summary
The solution system is designed to leverage the advisor’s existing practice and technical expertise,
building upon their existing competencies, and integrating three new competency domains. By
applying the associated knowledge, skills, and tools all at once we solve for the systemic nature of the
confluence of the six challenges that so far have eluded a complete solution. The end result is a new
paradigm, creating a new value promise to the market, a new role with new skills aligned with new
practice routines surrounded by new business models, new profit potential and all connected by the
integration of the technology to make it work seamlessly.
In the end, the solution system addresses all six challenges while building highly relevant and
profitable multi-generation practices that deliver bespoke solutions which are highly desired by
the marketplace and creates a new role for both new and tenured advisors that is inspiring and
motivational for them and the families they serve.
In our next and last paper we will explore specific ideas on implementing the solution system. We
will provide a framework from the perspective of the client experience overlaid with the advisor’s
skills, activities, and examples of the tools that, knitted together, create our solution system.

©2016 Pershing LLC. Pershing LLC, member FINRA, NYSE, SIPC, is a wholly owned subsidiary of The Bank of New
York Mellon Corporation (BNY Mellon). Trademark(s) belong to their respective owners. For professional use only.
Not for distribution to the public. The information contained herein, including any attachments, is proprietary to,
and constitutes confidential information of Pershing. It may not be reproduced, retransmitted or redistributed in any
manner without the express written consent of Pershing LLC.
Crosby, D. (2015). Behavioral Alpha: The True Power of Financial Advice. (Refers to Canadian Financial
Planning Standards Council article)
Kotter, J.P. (2012). Accelerate! Harvard Business Review.
Osterwalder, A. (2010). The Business Model Generation Canvas: a Handbook for Visionaries, Game
Changers and Challengers.
Resources
Copyright © 2016 Cannon Financial Institute

Prt 2 Advisor Relevance: Today and Tomorrow

Recommended

Recommended

More Related Content

What's hot

What's hot (15)

Similar to Prt 2 Advisor Relevance: Today and Tomorrow

Similar to Prt 2 Advisor Relevance: Today and Tomorrow (20)

Recently uploaded

Recently uploaded (20)

Prt 2 Advisor Relevance: Today and Tomorrow