Dennis Bashford says there’s a two-part question every financial planner should ask themselves: How much time do I spend doing things my clients value, and how much time do I spend doing things they just don’t care about?
Bashford, chairman of Brisbane-based Futuro Financial Services and a veteran of 38 years in financial services, says regularly asking that question, and answering it honestly, is the key to remaining relevant and being valued by clients.
He fears that a focus on technical issues in recent years has led to many planners losing sight of what clients genuinely value. It’s not necessarily about eking out the last basis point of performance from a model portfolio or a selection of managed funds.
“You read the client surveys from [companies] like CoreData. I think there’s credibility in what they do. And in virtually every survey, when the client is asked what matters most, the answer is the relationship,” Bashford says. “There was another survey, where clients were asked what matters most to them, and planners were asked what they think matters most to the client. The outcomes were just so different.
“The planner…said fees and portfolio performance. The client…said the relationship; and when [clients] were asked to list 20 things [of importance], fees came in somewhere like number 12 and portfolio performance came in around 16. It was staggering.”
Bashford says the amount of time individual planners spend constructing model portfolios simply is not warranted, based on the importance clients place on it.
“I think part of that is [planners] are a bit gun shy with some of the regulators’ [potential actions] if some of the portfolios are not right at the very top,” he says. “Then if there is a complaint, you can quite easily end up in grief. But as I said, it was staggering. And the question you’ve got to ask yourself as an adviser is, ‘Why am I spending 60 per cent of my time doing stuff that my client doesn’t appreciate?’ ”
Bashford says he is not advancing a case against model portfolios, only against individual planners building portfolios themselves and being distracted from the things clients value.
“We see a lot of planners spending a huge amount of time developing model portfolios, doing it themselves, at a practice level,” he says. “Luckily, we’ve seen a change from that. The industry doesn’t realise that if you’re going to develop a model portfolio, then you have to have a written case for why certain things are done, and you have to support that if you come under scrutiny from ASIC. You have to support that with a whole lot of technical data.”
He says the model portfolios Futuro and dealer groups like it use have been developed with extensive input and support from experts.
“To me, it’s quite arrogant that someone [who’s a planner and a part-time researcher would think] they can do a better job,” he says. “That’s hugely arrogant. But I think planners often do it and when you ask them why, the [answer] is – and they do not say it in these words – I want to add value to my clients. If I give advice, I want to feel like I’ve given them something. But these are things that clients don’t value.
“It’s the trust and the personal relationship. It’s the fact that my adviser knows what I want to achieve in my heart. He knows I want the boat and the car and so forth. He has that in the front of his mind and everything he does is directed towards achieving that.”
How things have changed
Bashford says that since he entered the industry in 1978, the biggest change has been the shift away from a product focus.
“Despite popular perception, I think many advisers are pretty keen to give strategic advice, where the product really is incidental to the advice they give,” he says.
But there has also been a shift towards the technical, and that has in some ways affected how financial planning is perceived.
“So we see a lot of people who give a client fantastic advice without the client being able to easily relate
that advice to everyday life,” he says. “To give you an example, a guy who may not be that sophisticated, who’s got half a million dollars to invest, if you tell him he’s going to get an extra 2 per cent on his money, first he has to do the calculation to work it out, then, to value that, he’s got to work out how he’s going to spend it.
“But if the fellow is an old Greek guy who wants to go back to Greece every three years to see his family, if the adviser says, ‘What this means is you’re going to have another $10,000 a year to put aside [for going] back to Greece to see your ageing parents’, [he can relate].
“The connection between the technical outcome and how it relates to the individual, I think, has been lost. And I think that’s really sad.”
The importance of good people Bashford says another key to longevity in the business is to surround oneself with good people and never be closed off to new or unusual ideas.
“I want people who challenge everything I am going to say,” he says. “I want people who are prepared to stand up for what they believe in. I want people to resolve an argument to achieve the best outcome, not just to win the argument. I want people who are not going to take things personally.
“[Futuro managing director] Paul Kelly and I are a good example. Paul and I argue a tremendous amount. We had a huge one yesterday. Yet we’ve been in business for 16 years and he’s one of my closest mates. We can say terrible things to each other. I’m not insulting him, I just think the idea is bad. And he does the same back.
“If he says something to me that might be rather insensitive, I don’t worry because I know he’s not having a go at me, and I know that ultimately the thing is not to win the argument, the thing is to get the best result. The hard part about that is you have to force yourself to shut up and listen to what the other guy says, and actually think about it. That’s the hard part.”
Bashford says leading by example and looking for a frank and genuine exchange of views encourages Futuro’s staff and its advisers to do the same.
“The people around you, if they see you doing that, if they know they can say something, they might also understand that it may not be accepted but it has been given serious consideration, then it encourages all that stuff to get out in the open,” he explains.
Futuro’s regular meetings with its advisers feature a session where new ideas and views are explicitly canvassed.
“You’ve probably been to conferences where you say the best value I got out of that was talking to my peers in the bar afterwards,” Bashford says. “It’s a bit like that but we do it without the booze. It’s very free-form, and that’s where a lot of the ideas come from. The guys will say, ‘What about this?’ or ‘I’d like to do that’. And once again, we’ve been able to create a culture [where] if someone puts an idea up …
the guy who put the idea up is fiercely defended.
“The guys are encouraged to put up things that might sound a bit crackpot. Very often, some of
these end up being leading edge. Some of them end up being crackpot.”
