Not long ago, a woman was referred to me for “investment advice”. She had just been made an offer for her business and, with her two partners, was keen to sell.
After taking her through our Seantos* process, she (and we) discovered that there was almost no chance that she would be able to live her “aspirational” life if she sold. We also learned that the major reason she wanted to sell was that she didn’t know how to deal with an unhappy business partnership which, in her mind, had contributed to her divorce.
The final strategies implemented included borrowing money (she had never done this before) to buy out one partner – a year later, she’s almost paid off the debt and she has never been happier.
Had I simply focused on her goals as initially described and provided an investment strategy with some bells and whistles, like super, insurance and estate planning, I would have been fully compliant, in terms of the regulations. But would I have been morally compliant?
We’re not yet through what will clearly be one of the worst financial crises in history. It’s far too early to gain any understanding of the potential repercussions for advisers; but so far it seems that there have certainly been some lessons learned. It doesn’t appear that any outright fraud has been uncovered; diversification of clients’ portfolios seems to have been accepted; and there has been more contact with clients than ever before.
So the industry should be in good shape; and who knows, maybe we’ll get some praise for keeping clients focused and staying in contact with them better than ever before. We’ve earned what we’re paid, no matter how we’re been paid.
But before I get carried away with the progress we’ve made, let’s not miss the golden opportunity that in my opinion will be presented by the market turmoil.
Let’s briefly go back over our history. In the 1980s we were really product sellers, with a focus on insurance products and upfront commissions.
As the legislation became more complex with the introduction of capital gains tax (CGT), fringe benefits tax (FBT), superannuation and many more complex legal adjustments, our role became more technical and an emphasis on technical knowledge became paramount.
In addition, the regulators imposed many compliance obligations on us and the move to a “profession” began.
We have now got to the stage where any half-decent planner knows enough about the technical strategies that it would be quite easy to roll them out to clients. In reality, how difficult is it to explain the ins and outs of asset ownership, superannuation, estate planning, investment and the other topics we deal with daily? In addition, the emphasis on compliance seems to have reached an optimal level.
But are we really recommending the most appropriate strategies? I don’t believe we are; or at best, we don’t really know.
Our clients tell us (mainly because this is what we ask them), about the things they want to do and have, what gives them pleasure – that is, the external. They struggle to know, let alone tell us, what really makes them happy – that is, the internal. Happiness is long-term, internal and comes from relationships, family, self-actualisation and creativity.
We’re asking clients what the “rungs of their ladders” are, but not what “wall they want to climb”.
To do this we need to help them understand their “money imprints” as well as their life and legacy aspirations. It’s going to require training at another level – not sales training, this is much deeper.
This crisis should, and in my opinion will, lead to the next evolution in personal advice. We will soon see a clear split between product sellers, technicians and principal wealth advisers. Each will have their role, but those that embark on the journey to help their clients to not only be optimal with the technical aspects but also to understand themselves better than before will become the most sought-after of all advisers.
*The Seantos process comes from two ancient Greek words: ‘sei’ meaning ‘to move’; and ‘anthos’ meaning ‘the weight of a burden’. It’s a process that we have developed which effectively removes the burden that money is, to most people.
Justin Hooper is CEO of Sentinel Wealth.
