Historians will look back on the global
financial crisis (GFC) as a painful but ultimately productive step in the
development of the financial planning industry as a profession. Perhaps more
than any other single event, the GFC will be seen as marking the point at which
the financial planning industry shifted from being a transactional,
investment-andproduct- focused industry, to one offering principally strategic
advice and services – and charging for the provision of those services rather
than for the sale of products. Andrew Inwood, the managing director and founder
of brandmanagement, told the MLC/ Professional
Planner Advice
Forum 2010 that his firm’s research shows the demands of clients, particularly
high-net-worth clients, have shifted fundamentally since the GFC. Inwood said
that pre-GFC, clients’ focus was on being offered the latest and greatest investment
opportunities, and on generating superior investment performance.
Clients
valued a planner’s ability to deliver product, pick stocks and time markets. Post-GFC,
however, clients’ priorities have, understandably, shifted. Inwood said the GFC
had “disturbed” clients, and planners cannot necessarily rely on old ways of
doing business. Those who have focused on product and have based a value
proposition on promising investment performance run the risk of becoming redundant.
Inwood said the shift presents significant challenges and opportunities. There’s
a great opportunity for planners to demonstrate clearly their “utility” – but
at the same time, that’s the challenge. It’s not always clear, even in a planner’s
own mind, exactly what their utility is. For other things, it’s simple, Inwood
said. When you buy a car you know how much power it has, what its fuel
consumption is, and how it makes you feel. Those things are its utility. When
you buy a computer, it’s how much RAM it has, the size of its hard drive, its
processor speed and screen size.
“What is the utility you offer as a planner?” Inwood
said. “Unless you can articulate that clearly, there’s a problem. Unless you
can articulate that clearly, they have no reason to use you.” Financial
planning, as a service, is clearly not becoming less relevant, Inwood said. In
fact, financial planning is arguably a more relevant service today than it has
ever been before. “But I do not think it’s the type of relevance you think it
is,” he said. Financial planners do two things: they make people wealthier,
obviously; but they also make people happier. And happiness is not linked to wealth.
“But the idea of control…means people are much more likely to be happy,”
Inwood said. Selling a product may satisfy the wealth part of the issue; making
people happy requires more. It requires more than making people feel like they
are in control. It requires putting them in control. Inwood said planners must
be “authentic”, because “authenticity” and trust are “almost perfectly linked”.
In other words, to win a client’s trust, a planner must actually be what they
say they are; and they must actually do what they say they’re going to do. This
is why making investment promises is a value proposition doomed to fail. Kevin
Bailey, principal and private client adviser with Shadforth Financial Group,
said there are some things a planner can control, some things a planner can
influence, and some things a planner can neither influence nor control. Bailey
said planners can control strategy, the advice they deliver and the range and
quality of their services. Planners can influence a client’s goals and
objectives, and the client’s discipline along the way. But planners can neither
influence nor control investment markets, laws and regulations, or inflation. Holding
oneself out as being able to control these things undermines a planner’s
authenticity.
But that’s precisely the danger any planner faces if their
offering is exclusively product-orientated, or if they make investment
performance promises (either impliedly or explicitly). Planning is about “problem
solving, not product pushing”, Bailey said. Yet research by the consulting firm
CEG has found that more than 80 per cent of planners are still investment centred.
These planners are “on a hiding to nothing”, Bailey said. Peter Switzer,
founder and principal of Switzer Financial Services, said the key to success in
the year ahead will be “getting out of your comfort zone, and doing things you
haven’t done before”. “That’s what you’re going to have to do this year,”
Switzer said. “I think we’re going to have to come up with something to respond
to the challenge.” Switzer said that whether it’s welcome or not, change will
be forced upon all planners in the year ahead. The old way of doing things may no
longer be appropriate. “If you keep doing the things you always did, you’ll get
the same outcomes,” Switzer said. “We want a different outcome. So what I say to
you is, KO your complacency, you have to get out of your comfort zone, and
embrace this year of change.”
