One of the best courses I took during my MBA was “Cases in Competitive Strategy” or something like that. All Michael Porter, all the time. You get the picture.
As I look at the dizzying array of “Fintech” products out there……(Fintech = computer programs and other technology used to support or enable banking and financial services for you non-techies)….I cannot help but remember one of the key take-aways from that course…….I seem to remember that if one wants to sustain that competitive advantage, according to Porter, you did so by taking on characteristics of the rebuffed main strategy. i.e. even if you are the low-cost producer, you must make the highest quality low-cost product possible. Similarly, if you are the high-quality producer, you must do so at the lowest price possible. That’s how to defend your turf. Obviously confusing in the real world, hence we had to take an entire course where we examined real-world examples.
So, can Fintech be used as a Competitive Advantage for a Financial Advisor? In my opinion, no. The costs of switching are low with cloud based products. The same products are available to your competitors. The actual code behind the products is invisible to to the client. Where’s the differentiation?
Do not get me wrong – Fintech is a very important part of our business, but I like to think of it as infrastructure. Everyone must invest in it. Heavily at times in fact. However it remains part of the background – a facilitator for both the Advisor and client. Being infrastructure, the Advisor needs to budget and plan for obsolescence. The client should look for firms that have invested appropriately in technology of all sorts. However, all this technology is not going to make one Financial Advisory firm stand above the rest. It’s the People that are the differentiators and will remain so as long as Financial Advisory work involves human interactions……….and that is not changing any time soon.