The Evolution of Human Capital and Technology

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The Evolution of Human Capital and Technology

• T3 Conference Hotel Intercontinental
• Presenter Richie Lee
• February 27, 2009
• 100 p.m. - 230 p.m.

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The Second Wave

• As we look into the future, compounding knowledge
  and experience levered by new ideas, new
  technology and the energy of the next generation
  will be the foundation of the evolution of the FA
  business.
• The success of financial advisory companies will
  depend on how they handle the following five
  issues
• How well they handle an enormous overload of
  information.
• How well the business adapts to changes in the
  evolution of infrastructure and technology
  necessary to create increased productivity and
  reduce costs and errors.
• How well companies listen to the needs of
  clients so they can effectively manage the value
  gap they must maintain to sustain their
  existence.
• They dont fall victim to entrenched beliefs or
  systems.
• How well companies match their technology and
  talent.

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Model for Adding Value to LFCs Value Proposition

• FC Financial Capital (traditional book value)
• CC Customer Capital (client loyalty, retention,
  reputation, referrals, growth potential)
• IC Intellectual Capital (reputational value,
  processes, systems, innovation, best practices,
  manuals, operational excellence)
• HC Human Capital (knowledge, skill sets,
  talents, experience, culture employees ability
  to leverage the CC, IC value and each others HC
  widen the competitive gap and sustain growth
  this involves external and internal HC)

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FOX Study ConclusionAssessment of Current
Landscape

• Our opinion is that few firms have captured the
  full economic potential of the ultra-wealthy
  market. Nonetheless, there are many firms that
  are well positioned for future growth and
  profitability. These are the firms that are
  adapting their business operations to the unique
  service needs and characteristics of
  ultra-wealthy individuals. These firms, in
  essence, are creating an entirely new business
  an integrated wealth advisory business that is
  distinct from the investment, private banking,
  financial planning and trust businesses from
  which it originates. Although we expect many
  firms to thrive over the coming years, we are not
  sanguine about the prospects for all, nor do we
  expect the evolution of the ultra-wealthy
  advisory business to be completely smooth.

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Key Thoughts

• Large, small and niche This is going to be a
  very large diverse industry, so creating tailored
  programs and solutions is going to be very
  challenging (and has been) with an industry
  thats still trying to define itself. Its
  almost impossible to create broad ranging
  tailored applications. The larger firms that
  attempt to deal with the high net worth and super
  wealthy groups will eventually get more useful
  and sophisticated proprietary software because
  they can pay for it. Small-medium sized firms
  will be more dependent on larger industry
  collaborative partners like Schwab and Fidelity
  to help them access these more leveragable
  software applications. The problems for the
  smaller group will be trying to make these more
  general applications fit when there is a wide
  difference in their client needs and business
  models.
• Human Capital The same will be true for HC in
  the sense that larger firms will be able to
  afford individuals with specialized talents that
  can help tailor their services to their clients
  individual needs. More generalized skills and
  capabilities will be the cornerstone for the
  smaller firms leveraged again by outsourcing and
  assistance from collaborative partners.

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• Black Swans
• Game changing technology
• Regime change/market disruption

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Catalyst to Change

• In the late 70s / early 80s, what original
  break-through software application totally
  disrupted the business analysis process?

VisiCalc
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Play Video
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Financial Disruption

• Were also dealing with the change in future
  return expectations, which may mean it will
  become increasingly important to compete
  competitively on a cost basis, requiring much
  better management systems and efficient
  application of human capital. In this type of
  environment, the use of technology to control and
  reduce costs may be a key tool necessary to
  survive an intense competitive environment.

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Regime Change
Source Strategic Economic Decisions SED Profile
June 2008 Woody Brock
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(No Transcript)
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Catalyst to Change (continued)

• Schwabs OneSource trading platform
• Morningstar
• Emergence of the PC
• Fax machine
• Internet
• PDA
• Cloud computing (Software as a Service or SaaS)

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Catalyst to Change (continued)

• Change in the types and locations of clients
• Change in talents and skills of new employees and
  owners
• Change in size and scalability of firms
• Different collaborative partners and their
  willingness to invest in the industry
• Continuing evolution of technology products and
  services
• Aggregators

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Where I started..
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1972 - The Beginning.
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Where I am now..
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(No Transcript)
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2008 LFC Technology Map
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2009 LFC Technology Map
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Strategy Structure

• The thesis that different organizational forms
  result from different types of growth can be
  stated more precisely if the planning and
  carrying out of such growth is considered a
  strategy, and the organization devised to
  administer these enlarged activities and
  resources, a structure.
• Strategy can be defined as the determination of
  the basic long-term goals and objectives of an
  enterprise, and the adoption of courses of action
  and the allocation of resources necessary for
  carrying out these goals.
• Structure can be defined as the design of
  organization through which the enterprise is
  administered. This design, whether formally or
  informally defined, has two aspects. It
  includes, first, the lines of authority and
  communication between the different
  administrative offices and officers and, second,
  the information and data that flow through these
  lines of communication and authority.

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Six examples of how LFC dealt with significant
change as it intersected with Human and
Intellectual Capital.

• Dual obsolescence
• Operations
• Paperless age
• Slave to software (ex financial planning)
• Worldox
• Cost of differentiation (partnerships and
  multiple locations)