Simon Hoyle compares being a practice manager in advice to doing a defensive driving course – you need to keep your eyes up at all times. Getting caught up in the “short-term stuff” is understandable, he said, but if you focus only on the tree in front of you, then that is what you’ll end up crashing into.
Hoyle, principal at CoreData and former editor of Professional Planner, gave a client-centric response to the question of what practices will need to focus on in the future, detailing four elements that will help firms win back the trust of the public.
The first of these is benevolence, or “the concept that you are acting in the best interests of the person”. The next is competence, which includes not only how skilled an adviser is but what skills the client expects them to have.
The third factor Hoyle identified was control. “You can’t make promises about investment returns,” Hoyle said. “Well you can, but that’s not wise.”
The final factor he mentioned was authenticity, which is about being who you say you are.
“Don’t make promises you can’t keep and deliver on what you say you are going to deliver,” he said.
The need for advice firms to rebuild trust was evidenced by research CoreData conducted, which indicated an alarming drop in the number of financial advice clients that have faith in their adviser.
“We asked consumers to rate their level of trust in financial advice on a scale of 1 to 10, where a score of six or higher is more trustworthy than non-trustworthy,” Hoyle explained. “In January, 60 per cent of people gave their financial adviser a score of six or higher. When we did that same survey in July, that figure had fallen to 35 per cent. So it’s very nearly halved in the period.”
Get your house in order
On stage with Hoyle, Debra McQuinn, principal at Strategic Resources Network, directed practice managers to get their processes and practices in order now or get out of the industry.
McQuinn speculated that in light of the Hayne royal commission, ASIC was just as focused on advice practices and licensees as it was on the banks. Specifically, she noted that the regulator would focus around culture – an issue that “keeps coming around time and time again”.
“The only way that they can put a finger on the cultural issues is by looking at the practices and processes in your business,” she explained. “I really encourage business owners to now say, ‘I’m running a business and I must be across what the Australian Corporations laws require, and also Fair Work and other legislative environments.”
McQuinn shared with the crowd that ASIC is looking at a Sydney practice and asking for some material that could be considered non-standard.
“You might be surprised to know that one of the things they’ve asked for is the position descriptions,” she said. “They’ve asked for those, KPIs – they’ve even asked for balanced scorecards.”
McQuinn quoted a report published by Elixir Consulting, in Perth, which stated in its foreword that ASIC recommended a “balanced scorecard” approach. Pressed on what that would mean, McQuinn explained that advisers should tick off their compliance audits and have reasonable scores on their feedback and KPI indicators first.
“I would be suggesting that your adviser revenue sits at the bottom,” she said.
McQuinn said practices needed to go back to the fundamentals, and make sure things like position descriptions were done comprehensively and put everything in scope.
“If you don’t have really robust position descriptions in place, how on earth can you have KPIs?” she asked. “And if you don’t have KPIs in place, you can’t actually transfer those into a balanced scorecard.”
McQuinn said the Elixir report is a harbinger of what is to come from the regulator.
“I implore you to take that to mean that ASIC is about to legislate what you are going to require in your planning practices,” she said.
One of the keys to maintaining a balanced scorecard, McQuinn said, was knowing your staff and enabling them to speak out when they see something amiss within the business. She used the collapse of Barings Bank as an example of what happens when co-workers are afraid to speak up.
“If you have team members that are feeling vulnerable in any way, when you need them to speak out they will be unlikely to,” she said. “So I recommend you take an active role in understanding how your team is feeling and let them know they’re supported.”