It’s when times are toughest that the true value of financial planning emerges. As the saying goes, even a turkey can soar in a high wind. It’s when conditions are poorest that the best planners, the best-run firms and the best-managed dealer groups and platforms will begin to shine.
So here’s a quick test to gauge how well your business might weather the current financial turmoil: How many calls have you had in the past month or so from clients who want to come in to talk to you about what’s happening? How many of those meetings have you held? And how effectively have you translated those meetings into revenue?
If you’re in a situation where your clients are in contact, you’re scheduling meetings and generating income from those meetings, you can probably stop reading now. Seems like things are probably going pretty well for you, and may continue to do so. But if your phones are strangely silent, or if clients are calling but seem reluctant to pay for the time you spend walking them through their strategies, portfolios and plans, then you may have identified an issue that you’ll have to address – and sooner, rather than later.
Imagine your business relies for its income almost entirely on selling investment products to clients. It ticks over nicely while markets are rising, while investor confidence is up, and while new clients are coming to you regularly (or existing clients are regularly adding to existing investments). Now imagine (and I hope you only have to imagine) what happens when markets tank and when investors pull in their horns and are more likely to want to withdraw from growth assets for the perceived safety of the bank.
Not only have markets made a dint in their existing investments – and on the trailing commissions that spin out of them – but the likelihood of them making additional investments in the current environment is remote, to say the least. If ever there was a compelling argument for why a financial planning business should be based on ongoing, client-focused relationships – an argument not based on some airy-fairy philosophy, but on cold, hard financial facts – then we’re about to hear it, loud and clear.
Forward-thinking planning firms have factored in this eventuality already. They’ve weaned their clients off the idea of “free” advice, onto a system where the advice is valued, and paid for directly by the client. For these planners, market gyrations are fast becoming irrelevant – in fact, when markets nosedive and more clients seek reassurance and guidance, these firms’ incomes look healthiest. And think a few steps down the track – when it comes to the sale of a business or to the transition from its current owners to new ones, which do you think is likely to be more valuable – the one whose income fluctuates with the market and occasionally slumps when investors get frightened, or the one that has a reliable, recurring and largely bulletproof income stream?
On another issue, an online version of the Professional Planner readers’ survey is now available. If you didn’t receive the print version in last month’s edition, or didn’t get around to completing it, now’s your chance. You could also go into the running to win two nights’ accommodation at Hayman Island, valued at more than $2000. Go to: www.professionalplanner.com.au/readersurvey