Success in the year ahead will depend in finding new ways of doing things – but also, really doing what you say you’re going to do. Simon Hoyle reports
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-and product- 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.”
