How to Prepare for Tomorrow's Financial Services Industry

For decades, the financial services industry has moved at a reasonably consistent pace. Most businesses could count on consistent earnings and predictable cycles. It was relatively easy to keep up with the industry’s slow evolution.

Not anymore. Profound changes in the business world are reshaping clients' needs and expectations, forcing the financial services industry to reengineer the roles it plays and the services it offers. Let’s examine several of the changes that are impacting companies like yours.

Technology: a double-edged sword

Changing technology has been a constant, but there are two trends that may influence your business most. Today's key differences are first, the acceleration of that change, and second, what the changes are allowing your clients to do. The most prominent example is the growth of the do-it-yourself approach to managing finances. Products such as Quicken^® and many other apps have put tremendous power in the hands of clients. This is particularly true for smaller clients, whose needs have always been more straightforward.

Convinced you offer something a software package can never duplicate: your professional insight? Don’t be so sure. As machine learning and artificial intelligence improve, systems may be able to mine data effectively enough to replicate professionals’ comprehension and guidance.

New competition from big names

As larger financial service providers have become more sophisticated and clients expect greater value for lower fees, the larger providers look to acquire smaller companies as a huge potential revenue source. If you want to keep your clients in the coming years, you can't settle for being better than the competitor down the street; you need to be prepared to compete against your state or region’s biggest names. 

Clients expect more

Clients are increasingly aware of what's available in the marketplace. They want more services customized to their specific needs, and to pay only for what they need. How you choose to adapt will have an impact on your business. You can resist offering customized options or embrace the opportunity to become precisely what each client wants you to be.

Who will do the work?

While the pace of change accelerates, the financial services industry as a whole is aging. Who will take the place of those aging and retiring practitioners?

Employee expectations have changed, too. Industry veterans nearing retirement age remember spending the early part of their careers “paying their dues” with long hours of grunt work and sales, hoping to advance their careers. Recent college graduates are more interested in work/life balance and have less patience for corporate ladders.

Company leaders must acknowledge that they won't always be able to keep up and need to develop a plan for the perpetuation of their business. Understanding the differences between generational values can help identify new leadership and ensure a smooth transition process.

Future-ready financial services companies

Businesses that fail to adapt or prepare for the changes are less likely to survive and need to perform strategic planning to become what their clients require—making more effective and client-centered use of technology, for example.

In an environment in which they must entice new hires, financial services companies should establish formal mentoring and leadership development programs to ensure that younger employees gain the skills, knowledge, and judgment needed to assume leadership roles in the future.

Finally, one effect of the aging population and the lack of formal succession planning is that many businesses will become acquisition candidates. Companies poised to capitalize upon the industry's evolution may add clients and employees by taking advantage of those acquisition opportunities. Additionally, companies may also look to mergers with similar-sized businesses to gain economies of scale and become more competitive with regional and national players.

Often businesses require an infusion of cash to take the next step to stay competitive. If you are thinking strategically about growing your business by acquiring another company, adding a producer, ramping up your marketing, or upgrading technology and don’t know exactly where to begin, please feel free to contact us. At Oak Street Funding, we have experts in lending who have helped hundreds of clients make their business goals a reality.

Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.