Dan Richards is a president of Clientinsights. He is a faculty member in the MBA program at the Rotman School at the University of Toronto.
In 20-plus years observing the financial industry, I can't recall a time of so much angst about the future - not just among investors but also among financial advisers and management of financial institutions.
That's because we're going through one of those rare periods of ground-shaking change that have taken place throughout history, something 2008's market gyrations hastened and intensified.
As a result, more and more investors are having frank conversations with their advisers about the value they're receiving as something known as "punctuated equilibrium" works its way through the financial industry.
The role of punctuated equilibrium
The late Harvard scientist Stephen Jay Gould first identified this concept. His core insight was that while change is a constant, the pace of change isn't - for millennia, species have gone through centuries of slow, almost imperceptible change, interspersed with short periods of incredibly rapid and intense shifts.
The same phenomenon has taken place throughout human history.
Just one example: In 1800, Napoleon's troops travelled using roughly the same technology and at about the same speed as Caesar's army almost 2000 years earlier. By 1850, railroads had changed how armies travel forever.
In the last 30 years, most industries have had to adapt to an entirely new set of rules. Change agents like Wal-Mart, Costco and online merchant Amazon.com have reshaped retailing. Manufacturing has been transformed by globalization and low-cost producers in China. Online alternatives have decimated the traditional business model for newspapers. Even services - once seen as a safe haven from global competition - have seen the effects of off-shoring.
Today, the investment industry is going through that same epochal transformation, in which traditional assumptions are challenged and historical practices questioned.
More demanding customers
There are a few common elements driving these changes.
First and foremost are increasingly demanding, intensely value-focused customers - today providing tepid value means you're toast.
When I talked to Canadians 20 years ago, the decision on their adviser was typically driven by historical relationships. Back then, I heard investors say, "It may have taken my adviser a while to win me over, but now that I've started working with him, I'm going to stay unless he gives me a reason to go."
Today it's an entirely different story. Now investors say "I may have worked with my adviser for five, 10 years or longer, but I'm going to go unless she gives me a reason to stay."
The shift in the driver of decision-making from yesterday's relationship to today's value has transformed industry after industry; look no further than automobiles, where in the 1960s loyalty ruled the day and men proudly branded themselves as "Ford buyers" or "GM buyers."
As a result, the one element that will define tomorrow's winners is the ability to demonstrate clear, compelling, discernible value. That's true of manufacturing, it's true of retailing. And, as new business models emerge offering a clearer and higher standard of value than in the past, it's also true of financial advice.
It's a cliché to say that not long ago investors paid for transactions and access to information and got advice for free. Today, more and more investors see transactions and information as commodities- the only thing left for advisers to charge for is superior advice that makes sense of the overwhelming volume of information and assimilates it into a sensible plan, as well as effective ongoing communication around that plan.
In some cases that plan focuses on investment or insurance advice alone. In other instances advisers also provide a broad range of advice on wealth issues such as tax and estate planning and charitable giving.
Of note, value doesn't stem from the plan itself - value resides in what the plan and the communication around that plan achieve.
In some cases, that might be tax savings. In others, it's the confidence that working with their adviser will enable Canadians to stick to their plan and leave them better off than if they were elsewhere or investing on their own.
In still other instances, the value might be peace of mind and the confidence that their adviser is on top of things and is watching out for their interests.
In Origin of the Species, Charles Darwin wrote: "It is not the strongest of the species that survives, not the most intelligent - but rather the one that is the most adaptable to change."
Given the unprecedented changes in the investment landscape, the challenge for many investors and advisers is to renegotiate their terms of engagement in a way that delivers sustainable value - not just today but tomorrow as well.