Financial education needs to become more consumer-oriented as there are significant benefits in having educated clients. Krystine Lumanta reports.
It is essential for the average adult to be able to make decisions about mortgages and loans, maintain a budget and save for retirement. Particularly in this time of uncertainty, clients shouldn’t have to wait for a life-changing event such as the global financial crisis (GFC) to ignite a desire to know more about their finances.
But for a client to become genuinely involved in the process, they need to have an awareness of their finances – so that they can start thinking of advice as vital and valuable, instead of a hassle.
Motivating a better attitude toward money will push clients to share related information with their adviser and, at the end of the day, make them accountable for what happens with their money.
Rob Skinner, co-founder of independent financial education website innergi, says his fee-for-service learning resource reinforces a commitment to education. He says the website was always an idea but came to fruition when the reality of uneducated clients became overwhelming.
“In my financial planning business, I had 30 per cent of clients coming from other planners – I could see first-hand that clients were moving,” Skinner says.
“Planners don’t have the time to educate, so when a couple that was receiving an allocated pension asked me, ‘Can you explain what an allocated pension is to us?’ I thought surely this was already discussed. But they had no idea of what their previous planner had arranged. I started to ask, ‘Are educated clients important to my business?’.”
Skinner says advising clients can be less time-consuming if the clients have basic money education and skills. Issues can immediately be recognised and dealt with by both parties.
“I’m a big believer that an uneducated client is not necessarily a time-bomb, but they’re certainly a risk,” he says.
“I could see with a lot of clients their heads were getting full because by the time you walk them through where they’re at, managed funds, admin platforms, franking credits, how investments work, how insurance works, estate planning, superannuation, their heads are full and sometimes they need a break because it’s just too much.”
Skinner says he is unaware of any other model that offers the same depth, engagement, interaction and innovation as innergi. The lack of independent resources available to clients means that all they can rely on is what they’ve been told by their planner, which has created uncertainty and a client mentality of: “I’m supposed to trust you, I don’t really understand but let’s do it anyway.”
Skinner says educated clients are also much better to deal with in general.
“Who do you like working with? I found an educated client is easier to do business with. You don’t have to explain franking credits every time or how a managed fund works if they have a level of knowledge. You can get down to the meatier issues a lot more quickly and you can sit in a meeting and talk about franking credits for five minutes but if they’ve already got that knowledge you can move on fairly quickly. You’re saving your time as well as saving your client money.”
Skinner says clients are sharing their positive experience with friends and in turn making an effortless recommendation.
“An educated client can become an advocate and therefore this is another benefit they add to your business,” he says.
Skinner says financially empowered clients understand the role of advisers, creating an appreciation for the industry and helping them to
justify the fee being charged.
“[It means] spending less time explaining concepts and, when things go wrong, you’re going to have less trouble as clients understand what’s going on and they’re going to expect [volatility]; but for someone totally in the dark who’s lost $10,000 in their super and has been paying you [for your advice], they’re going to be jumping up and down. You’ll have to put that fire out.”
Skinner says most would agree that an educated client is a good thing, but there is uncertainty amongst advisers about how it can be achieved. He believes that in this modern world of technology, the delivery of educational content should be online.
“I was looking at how financial planners themselves are learning,” he says.
“There’s webinars and online training but we don’t do that with clients. It’s almost like we’ve missed this opportunity to engage or provide extra education.
“Allowing clients to discover what is important about money to them is necessary. Keeping information from a client is no longer an argument.”
Skinner says the advantage of innergi is that it can be branded and implemented into financial organisations.
“The opportunity with innergi is that a planner can all of a sudden get a massive resource and look like they’ve spent up big and offer it online,” he says.
“We give them the framework and businesses can add their own articles, activities and video. They take the full branding of it.
“Incorporating innergi means that you can refer clients to read a particular module before sitting down with them so therefore, they will have a fairly good sense of what it is that will be discussed.”
Skinner says education available to clients has traditionally been “pretty bland”.
“If you’re going to educate on something that is seemingly boring and trying to make it interesting, how do you do that?”
Innergi has addressed this issue by providing live education through video – rather than static information – along with a “money personality” quiz, module activities and specific calculators, without naming particular products.
“I’m amazed at the amount of people who are engaging in our online quizzes to find out about themselves and their attitude toward money,” Skinner says.“Financial education is part of the genuine approach to engage clients.”
He says he doesn’t blame the industry for the lack of resources available.
“It’s too expensive,” he says. “Maybe you can get a bank to go there, but for most businesses that are arguably small to medium … you’re not going to have a lot of budget for these resources. But I’d argue that people are looking.”
According to the ANZ Financial Literacy Survey Australia (2008), 86 per cent of respondents felt they needed further financial education.
“It’s like advisers are happy for their clients to get financial advice from Google,” Skinner says.
“That’s what’s happening. So we’re giving them a safe place to search. People want to know how the financial industry works but no one wants to be sold a product.”
Andrew Shakespeare, senior adviser of JSA Financial Planning Group, has found that after using innergi’s knowledge centre for a year, engaging clients and receiving valuable referrals are the biggest benefits.
“When they don’t understand concepts like shares, insurance or super, I have them read a particular module and that way, they become very engaged in the advice process and they understand why we’re going down a certain path,” Shakespeare says.
“It’s also been a cost-effective way of providing referrals to us. Its effectiveness as an interactive tool means that clients want to share it with their children, family and friends. This has strengthened our business’s brand recognition.”
Shakespeare says considering a client’s money personality is another difference that has helped business.
“The ‘money personalities quiz’ means I get to know my client in much greater detail. If I understand their behaviour, I can tailor [advice] to their needs much better,” he says.
“The knowledge centre has given us a professional look – particularly access to the specific calculators that are hard to find online.”
Meanwhile, Fortnum Financial Advisers has announced it will go live with its knowledge centre in January 2011.
Ray Miles, executive chairman of Fortnum, says it is about delivering a “total client experience”.
