It’s easy to view the financial planning role purely in terms of assets and returns. But an adviser’s real value is in giving clients confidence about their financial future.
This is one of the main messages for planners from Andrew Inwood, principal of global market research consultancy CoreData. Inwood addressed the FPA conference this week on the topic, ‘Understanding demographic trends to improve the quality of your client relationships.’
“Advice transforms clients’ lives from disorder to order. As the relationship deepens, clients’ confidence about the future increases, as does their ability to plan and discuss wealth management,” he says.
Inwood stresses the focus on wealth building is still essential, because financial freedom changes people’s lives. But the value of advice is much more than just financial planning.
“A lot of it is about the simple idea of pleasure deferral – not spending now, to spend in the future. These are difficult conversations planners have with clients, and it’s those skills around difficult conversations on which planners need to focus,” he explains.
Inwood says data shows advised clients have a better view of their future. “They may not have much money, but they’re still more confident about what’s down the track and what they can achieve.”
One of the reasons people don’t seek financial advice is shame over previous poor financial decisions. Planners need to address this by encouraging clients to talk through their financial history, even if it is patchy.
“There’s an overwhelming need in the industry to improve soft skills to help clients navigate those difficult decisions,” Inwood says.
Advisers need to ask questions without putting clients on the spot or being confrontational. “Otherwise people will only seek advice in a crisis and you’re much better off if you can get to that point before a crisis situation.”
For instance, let’s say an adviser sees a client in their 40s with no savings because they have spent their disposable income on non-essential expenses like holidays or designer clothes.
Says Inwood: “The planner needs to be able to have a conversation about the need to change that behaviour, without causing conflict. Let’s say the client wants to retire at 65, the effect of 20 years of compound savings is going to be so much more significant for the client than had they waited another 10 years before seeking advice. It’s imperative for the adviser to have that conversation without clashing with the client.”
While these conversations are tough, the skills to handle them can be learnt. But it’s up to planners to find the right training for their individual needs. Those that do that are likely to have a substantial competitive advantage and more satisfied clients over time.
