Businesses that provide financial advice need to avoid jumping to sell a solution by default, as the future of the industry is goals-based advice, members of the Chartered Financial Analyst Society heard last week.
There must be a much more realistic understanding of the client’s needs and how products can help with them, Macquarie executive director, head of wealth advisory banking and financial services group, Rob Johnston, said at a CFA seminar in Sydney on Friday, February 10.
Johnston’s comments came a day after federal legislation passed requiring new education standards for financial planners. Those entering the industry after January 1, 2019, are now required to hold a relevant degree. Existing advisers will come under transitional arrangements, allowing them until January 1, 2021, to pass the exam, and until January 1, 2024, to meet the education requirements.
“Advice at its heart… is the confidence that the person on the other side of the table isn’t waiting for an opportunity to hear a pitch point where they can sell product, but is actually interested in connecting all those things that concern you in the right solution for you,” Johnston said.
He added that sometimes this meant the best advice was to tell a client they did not need advice, because it was not in their interest to take up and pay for products.
Johnston illustrated this point with the example of someone going to two different friends for advice on a personal matter. The friend who cuts off the conversation to talk about their experience was not listening, and interested only in solving their own needs.
Whereas, the friend who asks questions, is curious about why you feel the way you do, gives some insights to help you open up, and listens to you, allows you to gain understanding of what is going on, and what to do.
“They are not interested in being the solution; they are interested in you,” Johnston said. “The closer we can get people to those sorts of conversations in our industry, the closer we get to getting better outcomes for our clients.”
