Prove you’re worth it

I recently attended a media briefing arranged by the Investment and Financial Services Association (IFSA) for a handful of journalists.

Three of IFSA’s board members – MLC CEO Steve Tucker, BT Financial CEO Rob Coombe and Colonial First State CEO Brian Bissaker – along with IFSA chief executive Richard Gilbert, sat around a table over lunch discussing the current market environment, and how it will impact retail investors and financial planners.

Discussion topics ranged from the Australian Prudential Regulation Authority’s (APRA) recent report on large superannuation funds to the stability of the Australian financial system, but the overarching view expressed by all three IFSA members was just how important advice is in today’s market.

“The role of advice is more important now than it ever has been,” says Tucker.

“What we don’t want to have is a lot of the population who have got money to invest sitting on their hands. So getting advice and the confidence to get back into the market; we need to see more of that happening.”

The challenge, though, is making this happen. As planners, your whole existence is based on the premise that those who seek advice and establish a diversified long term investment strategy will be in a better position to achieve their financial and retirement goals than those who don’t.

But in these volatile times, when most consumers are running scared, how do you convince clients and prospects of the value in doing so? Moreover, how do you convince them that the service you provide is worth paying for?

“During a time like this, immediately after people start to focus on fees,” says Coombe.

“The pressure that puts on the industry is to make sure that they can effectively communicate to their customers that they’re getting value for money. It’s not always that the cheapest is best; you need to be able to properly articulate what the value is. There are challenges for us during a market like this to do that.”

When markets are down, not only is it harder to attract new clients, it’s harder to hang onto the ones you’ve got.

The latest Lifeplan ICFS Financial Satisfaction Index, which measures changes in the three key attributes that most impact a person’s willingness to recommend their financial planner, reveals a 2.5 per cent decline in the overall index from 73.2 to 69.5 in the last six months, and a 2.5 per cent fall in clients’ opinions of the trustworthiness and reliability of their planner.

Of the three elements that make up the index – trustworthiness of the planner; investment performance; and the technical abilities of the planner – investment performance was most responsible for the latest decline.

According to Caroline Patrick, Lifeplan group marketing manager, the index measure of investment performance dropped by 20 per cent over the last six months.

Tucker says we’re bound to see greater competition among both planners and providers in the new market environment, which will put pressure on prices and create a better deal for clients.

Those who thrive despite the increased competition will be those who effectively communicate the value of advice.

And those who can’t may as well stop giving it.