ZERO to ONE

Financial Advice as a Startup? Read This Book.

(A review by Dave Faulkner, CLU, CFP – originally published on the RazorPlan blog.) 

Peter Thiel is one of the founders of PayPal. In 2012 he conducted regular lectures at Stanford University where a student, Blake Masters, took detailed class notes. The book Zero to One is based on those notes.

Zero to One is an international bestseller and, with the subtitle “How to Build the Future”, is required reading for Silicon Valley startups.

My son Cory recommended that I read this book. I think his exact words were “you have to read this book”. He said it felt like the author had compressed all of his knowledge and experience with PayPal into a blueprint for entrepreneurs. Information that can be used in not only building and running a company, but also developing a product and marketing it.

To date, I have now read Zero to One 3 times. The first time I could not put it down. The second and third time I marked up the margins and underlined text throughout the book. Today it is a dog-eared mess and one of my all-time favorite reads.

So, what does a book about technology startups have to do with financial advice? Although I am a founder and CEO of Razor Logic Systems Inc., a technology company, when people ask me what I do for a living I almost always respond with “I am a financial advisor”. This is how Zero to One spoke to me.

In Zero to One, Peter Thiel states that every moment in every business happens only once. That copying what was successful in the past will only provide limited success, but creating something new can bring unlimited success.

Technology is changing financial advice. To succeed in the future advisors need to stop doing what worked in the past and embrace today’s technology. You need to think of your business as a financial advice startup, and to help do that you should read this book.

Seven Questions Every Business Must Answer

Although there is great value throughout this book for anyone in any industry, it is the seven questions that every business must answer that will help you succeed. According to Peter Thiel, if you don’t have a good answer to these 7 questions, you’ll run into lots of “bad luck” and your business will fail. If you nail all seven, you’ll succeed.

1. The Engineering Question:
Can you create breakthrough technology instead of incremental improvements?

Great financial advisors create value for clients in ways that their competition does not. Your breakthrough technology is your value proposition.

To be a great financial advisor you should have a value proposition that is an order of magnitude better than what is expected by clients. You must strive to add 10x the value because merely incremental improvements often mean no added value from the client’s perspective.

2. The Timing Question:
Is now the right time to start your particular business?

Is your value proposition relevant to your clients today? When I first offered financial planning to my clients in the early 1990s, delivering a printed plan in color was considered value added. Today even my retired clients do not want a paper plan. They prefer instead that I send them an email, or better yet provide a client portal they can use to access documents and basic financial advice.

The key to getting the timing question right is to understand what really matters to your clients and deliver that first.

3. The Monopoly Question:
Are you starting with a big share of a small market?

The larger your target market, the greater the competition. When you offer financial services that are no different than what is offered by a bank, you are viewed as a small player in a very large market.

When you identify a unique solution for a niche market, and provided you are good at what you do, you will own the market and create a monopoly for your business.

4. The People Question:
Do you have the right team?

There is an old saying that goes “It’s not personal, it’s just business”. Today FinTech is disrupting how average people access financial products. The problem with technology however, is that when it comes to people’s financial security, “It’s not just business, it’s personal.”

The personal relationship that you and your staff have with your clients, combined with leading edge technology designed to make you and your team more efficient, should be front and centre in your value proposition.

5. The Distribution Question:
Do you have a way to not just create but deliver your product?

Once you have created your value proposition, the next thing you must do is formulate a plan to tell current and prospective clients about it. If you take the position that your value proposition will “speak for itself” you may have some success, but you will not create disruption in your chosen niche.

Your value proposition is not complete without a clear plan to tell your clients what it is and why it should matter to them.

6. The Durability Question:
Will your market position be defensible 10 and 20 years into the future?

Every financial advisor should have a plan for their own financial security. You must ask yourself “What will financial advice look like in the future, and how will my business fit in?” Financial advisors that fail to anticipate the impact technology will have on financial advice will find it difficult to maintain their income as clients leave.

Financial planning, client management and compliance can all be improved with technology to automate the routine tasks you perform daily, providing more time for personal interactions.

7. The Secret Question:
Have you identified a unique opportunity that others don’t see?

Many financial advisors justify their worth with a conventual truth that clients want the human touch. They hold on to the belief that direct to consumer financial technology, or FinTech, will only appeal to a small segment of the population and not to their clients.

As a financial advisor of the future you must embrace technology, not ignore it. You will create your value proposition around the secret that technology combined with the human touch, is “How to Build the Future” of financial advice.

In Conclusion

As I said before, I liked Zero to One not because I am in the technology business but because I am a financial advisor currently being disrupted by technology. When you read this book, relate the ideas and stories told by the author to how you run your financial advice business, then imagine what your business could become if you embrace the technology available to you.

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