The best financial planning practices in Australia do four things better than their peers, but for all firms the best way of attracting new clients remains word-of-mouth referrals, according to new research commissioned by the Association of Financial Advisers (AFA).

The AFA white paper, Pathways to Excellence, conducted by the research group Beddoes Institute, says the things that set the best practices apart are the qualities of individual advisers, the practice’s service proposition, the actual advice process and the charging model used.

In commissioning the research, released yesterday at the association’s national conference on the Gold Coast, the AFA says it set out to answer simple questions such as what clients value the most in their adviser relationships and how best practices are meeting their clients’ needs.

Blueprint for building better practices

The “best practices” surveyed are the 18 finalists in the AFA Adviser of the Year Awards this year and last. The research examined how those practices are structured and how they operate, and included in-depth interviews with 960 clients from the firms.

Rebecca Sheils (right), program director at Beddoes Institute, says no such study of the financial planning process, mapped against clients’ expectations at three clear stages in the advice process – pre-engagement, engagement and ongoing service – has been conducted in Australia before.

It has set out a clear blueprint for building a better practices – and also highlights the issues that continue to inhibit the take-up of advice by more people.

“What we wanted to do was identify the DNA of a leading practice – what is the blueprint, what makes up a leading practice,” Sheils says. “And the reason we wanted to do this was to share this information across the industry so we could assist in raising the bar of the profession. But also, importantly, to create an evidence-based pathway for becoming a leading practice – again, that we could share with other advisers in the industry.

Client journey

“This whole paper does a deep dive into the three key areas of a client journey.

“During the pre-engagement phase we first mapped what the trigger was for consumers to seek out financial advice in the first place. What we found out – probably no surprise – is there’s usually a significant life event for a consumer. They’re getting married, having children, getting a raise in their job, approaching retirement, et cetera.

“Then it’s the gravitas of the decision to trust someone with your financial affairs that means consumers take a fairly rigorous research process when choosing a financial adviser. It’s a very big decision and trust is at the heart of it.

“We probed consumers for when they’re going though this adviser-selection process and seeking out advice, what they are looking for in terms of the qualities of the adviser. What we uncovered was a really long wish list. They have very big expectations, needs [and] demands of financial advisers in general.

“But then when you really push them – quantitatively, in our survey of nearly 1000 clients – on what was the one thing that was most important in choosing your financial adviser, the thing that came out for a majority of people was a referral from a trusted source. So, again, it comes back to this notion of trust.”