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Adapting – Learning from Nature

Adapting – Learning from Nature

All systems follow some common rules—they evolve toward complexity, they tend toward chaos, and they must accomplish some form of adapting or perish.

Like nature, governments and economies, businesses are subject to the same iron laws of all systems. In today’s environment we see a centerpiece rule being played out—amid a changing environment, the survivors will be those that find a way to adapt.

Fortunately, nature has perfected the process of adapting to change over millions of years of trial and error. It offers some lessons that may be worth a financial advisor’s consideration.

Look to Biological Systems

Successful and resilient biological systems share some key attributes that may be especially relevant to advisors. Chief among them are:

  • Heterogeneity—In the business world, heterogeneity might be more appropriately described as diversification. Businesses that rely on a single revenue source are much more at risk if changing conditions affect that source of revenue. For most advisors, their primary source of revenues is attached to assets under management (AUM) and trading activities. By diversifying into additional revenue streams (e.g., subscription-based financial planning, portfolio consulting services, financial coaching, Social Security planning services), advisors may see revenue enhancement during normal times, as well as greater revenue stability during less favorable periods.
  • Adaptation—Altered circumstances require new approaches. Whether it is client interaction, new business development, or retirement and investment approaches, advisors will likely need to adapt the ways they communicate, prospect, and develop financial and investment solutions for clients.
  • Embeddedness—Every system is part of a larger system. Advisors can no longer operate as an island. They must understand that sustaining success means being aware of, and responsive to, those larger systems. Whether it is climate change, eroding municipal financial health or ballooning federal deficits, each will impact investments, retiree choices and the future challenges an advisory practice will face.

While responsiveness to changing conditions is critical to survival, it’s important to remember that the response needs to be within the context of an advisor’s capabilities. Becoming a financial psychologist is not an option if an advisor lacks empathy. Rather than attempt to be something they are not, advisors should look to build on their strengths, develop a set of complementary skills to leverage those strengths and, most importantly, not constrain themselves by old thinking.

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