Building a competitive advantage with technology

“Wisdom is learning from your own mistakes, but true wisdom is learning from the mistakes of others.”

One of the most valuable practices that you can undertake within any aspect of life is to look both backward at history and across at adjacent events to recognize patterns at play. With that in mind as I was reading an article the other day about some of the early online retailers, I noticed a pattern emerge that directly relates to the future of the wealth management industry; The possible migration of online-based technology companies like Wealthfront and Betterment to brick and mortar locations.

From the article: You may have heard of Casper, the online mattress company. If you’re not familiar with the company, it was founded in 2014 with one goal in mind: disrupt and modernize the mattress buying process by bringing it entirely online. For reference, they have about $100 million in revenues(all online.) The article focused on how their current expansion strategy runs polar to their initial one. In short, as the cost of online marketing has become increasingly competitive and expensive, Casper has turned its focus to opening more than two hundred physical locations to use as marketing vehicles. And, it’s not just Casper, companies like Bonobos, Warby Parker, and Purple are now seeing the same places that they disrupted as valuable assets. To think, the same companies that railed against tradition and anything even remotely linked to the status quo, are now looking to make what was old, new again. Makes sense, right?

So, what does this all mean for us in the wealth management industry?
Well, let’s first consider that these disruptors that started online and are now slated to move to brick and mortar, all started by building great technology products and services. They invested in building a strong foundation in technology that was extremely efficient and that allowed them to scale their growth quickly.

My thoughts: With this as our backdrop, my thesis is that the brick and mortar trend is an early one that will continue. And those technology-based wealth management firms that we may have never seen as competition will likely look to the same strategy as these other innovators in adjacent industries. The likes of Wealthfronts and Betterments will look to storefronts as avenues to grow by placing a couple of their human advisors in physical locations to meet with clients personally. Doing so will allow them to pair their great technology with the human approach we specialize in while being extremely efficient and ultimately meet the demands of the current market.

They have already begun to make shifts in their business model. For example, Vanguard recently began exploring the brick and mortar option. And I think this strategy will continue to expand as tech companies course correct from their initial inclination that humans were no longer needed.
Again, what does this mean for you? Well bringing these innovators to a storefront and allowing clients to meet with a human will be the real challenge to our industry. These firms already have re-thought how to make their technologies extremely beneficial to their processes. The one thing they were missing was that human element. If they follow the Caspers and Bonobos of the world, then they now have solved for that problem.

And so as an advisory firm that already has a storefront and a local clientele, the one thing that we are missing is that investment in technology that allows us to be just as efficient. Combining this with a digital experience that is desired by the client would allow us to scale just as quickly as our competitors that started with technology.

As a savvy financial advisor, I’ll be the first to say that my prediction may be wrong. But, look at it like this, the worst case scenario, if I’m wrong, is that you’ve adopted technology that allows you to compete digitally and places you well ahead of the competition. But if you want to be one of those that bet against this trend, then if you are wrong, you will be drastically behind and likely unable to catch up.

So, the quick takeaway:
Invest in technology now, so you can aggressively combat competitors.