Advisors: Are You Amazon or Borders?

What happened to Borders?

Failure to adapt

Once upon a time in 2005 the literary mega-retailer Borders had more than 1,200 stores. As of September, they’ve disappeared in a poof.

Borders was founded in 1971 by Tom and Louis Borders, University of Michigan graduates who took over an 800-sq foot used bookstore. Publisher Peter Osnos wrote on The Atlantic website that part of their unique offering was that they had developed “an inventory tracking system that, by the standards of the time, was as sophisticated as computers allowed.” Ironically, it was the company’s inability to adapt fast enough to the growth of online commerce that contributed to its downfall.

via The Huffington Post

What happened to Borders is what happens to every business that continues to focus on what customers wanted in the past and fails to adapt to changing demand: they went extinct in a flash, dinosaur-style. Online shopping took off and Borders somehow failed to notice. The financial advice business is having a similar tectonic shift in underlying technology and consumer desire. What are you doing to evolve?

Value erodes by standing still

Bookstores essentially offer the same value proposition to consumers they did 2 centuries ago. Looking for something to read? Go there and you can pick from their selection, touch and feel the books, stand shoulder to shoulder with other bibliophiles, pay a fair price and even get a coffee in a comfy chair (Ok, that last bit is new). By contrast look at Amazon.com. It catalogs millions of book titles you can pull up in an instant. You can see the books, look inside and read bits of most books. And Amazon also has reader reviews and a recommendation engine based on both your and other peoples purchases. They even have over half a million e-books, many of which are free. Plus you can order lots of other stuff and while not immediate, shipping is very fast.

So, while not without their advantages, the basic bookstore value proposition has become pretty weak as these options have sprung up. First you have to go to the bookstore, second, they can’t possibly have anywhere near a complete selection – every bookstore would need to be the size of the library of Congress. Bookstores haven’t changed much. But just by standing still they have become inconvenient and constrained. Sure, you can get that great coffee, a comfy chair and touch the books or even read a little. And that last bit is why most people go to bookstores today – not for the books, but for the experience. While bookstores have evolved a little, what consumers want from them has changed dramatically and that shift has restructured the industry.

Bookstore advisors: you ARE being disrupted.

You see, what clients expect from you is different now and that change will accelerate. What are Bookstore advisors doing that makes them doomed to fail? Nothing. Or better yet, nothing different. They are becoming less valuable to clients simply by doing the same things they always have.

That model? It ain’t gonna last. Why?

  • Bookstore-style client service is becoming less interesting by the nanosecond.
  • A Prestigious firm name doesn’t mean as much anymore.
  • Referrals won’t work if your prospective client Googles your name only to find your cookie-cutter “Advisor” website and inactive social profiles.
  • Free consultations suck. Nobody has time for them anymore.
  • Advertising sucks harder than free consultations. Inbound marketing is where it’s at.

How can you be the Amazon of financial advisors?

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DJ DJ is a freelance writer, hopeful photographer, and social media has-been. He writes to financial advisors about lifehacks, science, technology, business and marketing for Blueleaf, a software that helps create dramatically simpler, more scalable financial advisory businesses. You can find DJ across the web (about.me/djswitz) or you can just follow him on Twitter (@djswitz)!
  • I agree with your recommendation to listen to what clients want, innovate, adapt, rinse, repeat. The pace of change is accelerating, and this isn’t simply about technology. People are communicating and consuming more information in different formats all the time.

    I think a possible by-product of this accelerating change is that the typical 50- to 60-year-old advisor will be transitioning out of the business sooner than perhaps they’d plan if they’re not willing to evolve with their clients’ needs.

    Good post, DJ

    • Thanks Russ, glad you liked it.

      Certainly, listening and responding to clients needs is a savvy business persons baseline responsibility, but it also pays to anticipate those needs and get out in front of the consumer. This goes beyond an early-adopter type mentality – even though that never hurts, especially when the barrier to entry is virtually nil, like on social media – but extends to creating and offering products/services that client might not know they even want yet. That’s when you can really pull ahead.

      • Saw this article by Mark Cuban this afternoon after leaving my earlier comment.

        http://www.entrepreneur.com/article/222501

        In the article, Cuban criticizes the dangers of listening to your clients. While I’m not sure we should innovate in a vacuum without client input in a professional services business, his article raises some interesting points.

        • Definitely. I think the distinction between listening and soliciting from clients is not very clear here. It sounds like “his company” was directly asking their customers for advice while the other company just paid attention (listened) and went and did their own thing.

          Either way, as with most things, you probably want to find the right balance between customer input and personal opinion.

        • Mark is dead on and I don’t agree with him on much. You unambiguously CANNOT get useful information about evolving a product or service by asking customers what they want.

          This is a really important topic and I’m glad you raised it Russ. It’s worthy of a number of blog posts. In the meantime …

          The reason clients can’t tell us what they want (what they’ll pay for) is that as humans, we don’t really know what we want. And we can’t predict how we’ll respond to some future offer. Also we all have a tendency to ask for “faster horses” rather than a car.

          So what can clients tell you? Clients can tell you their problems. In the context of evolving a financial services business, they can tell you not only their financial problems but also the problems they have in using your service. As an entrepreneur and service provider it’s our job to innovate to solve both.

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