This week the Australian Securities and Investments Commission (ASIC) took its first action against a financial planning firm for an alleged breach of the best interests duty.
If it were not already obvious enough, the regulator is reminding financial planners it wants them to treat seriously their legal and regulatory obligations to put clients’ interests first under the Future of Financial Advice (FoFA) laws.
However, it would be, and in some cases has been, easy to allow regulatory requirements to drive the financial planning process. Fact finds structured so planners can tick off compliance requirements are not unusual, but allowing those requirements to be the first experience a client has of a relationship with a financial planner is the wrong starting point, according to Noel Corley.
Corley – a name that will be familiar to those who have been around the industry for a few years (Professional Planner has known him for longer than either of us cares to remember) – has occupied a number of sales roles over the years and arrived at the realisation that in many ways the sales process involved manipulating others.
Sales targets or KPIs linked to volume or any other incentives that place the planner or the planner’s business at the centre of the process don’t create real relationships at all, and really revolve around the needs of the salesperson, regardless of how they might dress it up as meeting a need – real or perceived – on the part of the buyer.
Corley says there is “a simple truth” that all financial planners must grasp: it’s not about you.
He invites planners to reflect on how a typical client meeting is structured. What is the first thing you do? Hand them a financial services guide? Give them a copy of your CV? Talk about the capabilities of the firm? Tell them what you can do for them? That’s not about them at all.
Work by the Beddoes Institute shows that most people won’t choose you as their financial planner based on just your qualifications, accreditation and technical expertise. That’s not to say those things are not absolutely critical – they are – but they are taken as a given. And take note: those things are all about you.
Lack of trusted referrals
At the Professional Planner Dealer Group Summit on Monday and Tuesday this week, a director of the institute, Rebecca Sheils, said a significant proportion of clients choose a financial planner because they have received a referral from a trusted source. Further, she said, a lack of trusted referrals is what’s holding back more people from seeking financial planning help than currently do.
It’s unlikely the client referring to you spoke effusively to a family member, friend or colleague about your CV and your qualifications and whether you’re a Certified Financial Planner, or whatever. It was more likely about what you did for them – a problem they had, and how you solved it.
CoreData presented the reliably excellent summary of its licensee research at the summit, as well as announcing the 2016 licensees of the year, and it has found that most planners get to the end of a meeting (or meetings) with a client and can’t tell if they are likely to take up their services or not. It bases this conclusion on the fact that the rate and timing of follow-up for both client groups is essentially the same. Why might that be?
It could be that there’s a reluctance to follow up for fear of rejection; it could be there’s a mindset that says, well, I’ve sold myself to this client and now it’s up to them; it could be simply a time and resources issue; or it could be something else. But most of those reasons centre, once again, on the planner, not on the client.
Corley is starting to talk to financial planning licensees and individual planners about his concept of the simple truth, and on aligning the personal intentions of financial planners and the commercial intentions of financial planning businesses with the concept that it’s not about them at all.
In this context, Corley is developing a framework for bringing the hard technical skills that all financial planners must have into the client’s world in a meaningful way. He’s working on a structured program to help financial planners understand the concepts, to adjust their mindset and intentions, to show them that even the language they use communicates to a client whether or not they’re really the centre of attention.
By Corley’s own admission, what he’s talking about isn’t rocket science. But in a world where many financial planners and licensees talk extensively about the importance of client-centric advice businesses and processes – and most of them sincerely believe what they are saying – it can sometimes take an outsider’s perspective to shine a light on where the disconnect is.
It could be the start of a solution to an issue raised repeatedly by the more than 40 heads and senior executives of financial planning licensees who attended the Dealer Group Summit – the action that’s needed to start to back up the rhetoric about “client-first” advice.
Corley describes the process of embracing the simple truth as “a joyful discovery tour” for the individuals who do it. And moreover, it could also turn out to deliver better advice, and create better businesses.
