Virtual Financial Advisor: Next Big Thing or Expensive Fad? #Article

Virtual Financial Advisor: Next Big Thing or Expensive Fad? #Article

This article was originally published on

Summary: The Virtual Financial Advisor business model appeals instantly. Wherever you can put a laptop up and connect to the Internet, you get to work. You can fill your practice with ideal prospects across the world, not just those in your zip code you happen to live in. You will stay flexible in your routine— and really low your overheads. What doesn't love?

But the truth of running a virtual financial consultancy firm isn't like the brochure. Advisors who want to succeed need to develop a new set of skills for the digital influencer. Competition is extremely fierce and well funded. I talk through 5 explanations in this article why a virtual firm poses a specific set of challenges. Nevertheless, committed advisors will eventually make it work-as long as they are willing to do the right things to put their company on the map.

The emergence of the business model of virtual financial advisor is what happens when a few developments converge in a perfect storm. More young advisors join the field and want to work remotely, without their zip code limitations. Niche marketing has grown in popularity, with advisors using technology to more and more reliably meet their target audiences each year. Lastly, many customers are crying out for open financial advice that appeals to them— and is exempt from sales of goods.

This seems to be supported by major consulting firms and market analyzes. McKinsey estimates that 42 million households are top candidates for virtual advice, representing $66 billion in annual revenue. The same company reports that many customers are receptive to financial advice from someone who doesn't live or work next to them. "Consumer surveys across mature markets show that at least 20 to 30 per cent of wealthy and affluent consumers would use a dedicated financial advisor outside their local area, and a larger share would be open to the concept."

The idea of a virtual financial advisor makes sense in the light of the above — and it should work in theory. After all, the technology of today makes the location of a physical office less important. Quick all transactions and communications, from account transfers to meetings, can be done digitally.

And yet, after working on its strategy and marketing with 300 + advisors, I would suggest that this "virtual" take is likely to be a costly fad for most financial advisors.
What is that for?

I can list five explanations

Reason #1: It’s harder for a virtual financial advisor to build trust

A few years ago, I read a great book called The Trusted Expert, by David Maister and Charles Green. Within, this formula for building trust is laid out by the author: trust= (reliability+ reputation + intimacy) / self-orientation.
Trust is of paramount importance in our business as our success largely depends on how well we establish relationships.

Yeah, trust can be built across online and offline experiences. But building confidence is more difficult when you don't communicate face-to-face with people. We can see that one part at a time, if we follow the confidence formula.

Can you as virtual planner be reliable?  Absolutely. As a signal that you are there as promised, ready to solve the client's question, you can show up on a Zoom conference call in time. 
Can you believe it?  Clearly. If you follow progressive business models, you are likely to be a CFP, CPA, or CFA (or on the way to receiving one or more of those designations).  

But the million-dollar question is, can you construct intimacy without interactions in person?
I found it very difficult to create "digital" intimacy— unless you're prepared to spend a lot of your time creating content and cultivating online relationships. For most advisors, this is a significant barrier, as it would allow them to spend most of their time being a marketer and an influencer — not a financial planner.  So, unless you find that influences-building online is your natural talent, you'll be facing uphill attention battle.

Reason #2: Running a virtual practice requires you to produce original content 

If you want to digitally work, there's simply no way you'll be productive without creating original material.  

I know this argument will create resistance in some of you who feel that you have enough experience and qualifications to merit your attention. My experience seeing through several consulting practices tells me that knowledge is not enough. You need to create a blog, shoot videos, or host a podcast... or perhaps all three of them.

And you don't just have to do one or all of these stuff... you have to do them for a very long time, regularly. And you have to get remarkably good at doing them.  
Don't believe me? Only swipe through your news feeds for Twitter, LinkedIn, and Instagram... There are hundreds of companies trying to get your attention at any given time. The ones who win are those with the ability to scroll-stop. You have to ask yourself if you have it inside of you.

And here's something I've learned about those in the financial services industry who manage to crack the code: they end up transitioning from the position of therapy to become media speakers, consultants, or public figures. Or, they enter a larger company and become the public face (or marketing head). 

Another trend is that many successful virtual financial advisors end up doing consulting with the media and the marketing or industry.  That makes me wonder if the business model of virtual consultancy firm is financially inherently limited.

Reason #3: Compliance will hamstring your marketing efforts

Compliance is a consideration for each individual advisor but it is particularly relevant for virtual financial advisors. The key reason for this is the sheer volume of content they need to build a relationship through mobile screens with someone.  

Those in the financial planning industry realize they are already competing with hundreds of financial coaching firms which are not limited by their licenses. Those rivals have testimonials to fly. In their ads, they can claim what they want.

On the other side, something you can't do.  By playing by the rules of the industry and registering your company, you are effectively giving up the most powerful form of publicity available to service businesses, which is feedback and testimonials. The influx of "evidence" from "financial experts" (and the lack of equivalent "proof" on your page) obviously confuses consumers. It also makes working through noise difficult and expensive for professional advisors.

Bottom line: Because your competitor can run their client's testimonial advertisements and safe ratings, they can make themselves look more trustworthy and reliable than you are. And appearances are incredibly important for an online business.

Reason #4: Competition will drive up your client acquisition costs

Every day, you see Artificial Intelligence posts, robo advisors, trading commissions being cut to zero... The industry is changing rapidly, but how much of this transition is applicable to the ability of financial advisors to develop a practice?  

In my opinion, not quite a lot. A financial advisor in the area who is developing face-to-face relationships has nothing to worry about. His or her company will last a long time.

But counselors who simply want to work don't have the luxury of a face-to-face connection. It's hard and expensive to get somebody's attention and it's getting more expensive by the day.  In this arms race, virtual advisors contend with large corporations with huge marketing budgets, and an array of cross-selling products and services.

Historically, large companies have invested most of their advertising budgets on traditional media and brand, but gradually they will move the investment to digital and social media to keep up with the interest of customers.  And this technique gets a twist. It probably won't be conventional ads... You're going to see more actors and hired public figures to promote their products.

Until their "amicable split" earlier this year, we saw Creative Planning test the waters with Tony Robbins.  The level of "celebrity" can vary by business, but the consequences are likely to be catastrophic for rank-and-file virtual financial advisers. When big financial services companies recruit diverse, recognizable, and respected public figures to be their brand's face, those people will become your competition.

And the bottom line is... Very few advisors have the sort of presence that can compete with a skilled, likable, and persuasive public figure, in writing or on film.

Reason #5: You will (eventually) lose the SEO game 

Most of the advisors I meet at conferences get their leads from NAPFA and the Fee-Only Network referrals, COIs, and web traffic. And it works...... for now. 
Big financial services companies, however, have already started investing extensively in search marketing. This includes written content, podcasts, video, and the new voice-first content of the quest. The sheer volume of their content is likely to place their name above yours in a typical Internet search, combined with backlinks created by their public relations strategy.

Why is that important? Because when customers do not have the experience to select the best financial adviser, they are likely to default to the rating of the search engine as a proxy for the authority and consistency of the advisor. It will take months of hard work to figure out how to boost your ranking and no promises. In the end, the big company may have more money for out-testing, out-backlinking and out-ranking you for your keywords.

Virtual Financial Advisor: Next Big Thing or Expensive Fad?

So, if you're running a virtual drill, or if you're getting your heart set on it, what should you do? 

I think you've got a window of opportunity before locking yourself out of the market. I'd say 5 years, but it might be a little less. You need to have the right plan and do it in a particular way, because you don't have time to waste.

If you are determined to give it a go, then you must begin by perfecting your content and influencing your skills. To do so needs a mental shift, as you must first see yourself as a marketer and influencer— otherwise you will not be a financial advisor. And note, while social and digital marketing strategies can work well, they are generally intended to complement the growth of local business.

                         This article was originally published on

Post a Comment