With financial planning undergoing a critical transition and advisers moving from being price-takers to price-makers, many can struggle to articulate their value.

As the industry contemplates change, the good news is that of the primary elements of product, administration, and advice, the latter is the only one where margins are being maintained or in some cases increasing.

This means the only way advisers will survive and thrive in this climate is to both add value and demonstrate that their advice adds value. With that in mind, here is a playbook to help you think through this challenge:

Define What You Do

The business we are in is financial advice. We help people with strategies to increase income, decrease expenses, reduce taxation liabilities, protect assets and ensure security in any crisis so they can achieve what’s important to them.

Through personal and accessible service, we develop a roadmap to success for clients, showing them clearly where they are now, where they would like to get to and what milestones they need to hit along the way.

Of course, we know things can change for clients in the meantime – financially and personally. No one’s life is static. But our role throughout is to provide discipline and accountability, just as personal trainers keep their clients to their fitness goals.

Define Your Value-Adds

Once you’ve clearly defined your role, there are two types of value you need to be able to articulate and demonstrate – the tangible and the intangible.

The tangible arises mainly from ‘below-the-line’ service related to money, investments, risk insurance and mortgages. The intangible is sourced mainly from the other services related to desired client outcomes.

Tangible value is anything that will have a monetary impact, like tax savings from concessional super contributions. Intangible value is still value. But it’s harder to quantify and is often determined by the clients in how they feel.

The point is that doing more business on the latter you make deeper connections, add more value for clients and develop a more sustainable business.

The more commoditised services we can quantify in dollar terms. For instance, we can help lower administration and investments costs, and reduce taxation liabilities.

People enjoy seeing their progress, whether this comes from their investment portfolio, property, bank savings etc. Track it. Show them.

Embracing and articulating a consistent investment philosophy can also help you demonstrate value. A good philosophy is one based on sound investment principles and one that increases the prospects of the clients meeting their goals.

Advisers who chop and change, putting product at the centre of the conversation risk leaving the clients focused on the wrong things such as short-term returns, stock specific and other idiosyncratic risks, and vain attempts at market timing.

The worth of advice as a form of stupidity prevention is well documented, with various industry papers putting the value added at up to 4.4 per cent per annum. This is  simply via setting realistic expectations and coaching good investment behaviour.

Citing this evidence not only provides peace of mind but also can help clients avoid blow-ups and keep them in their seats in volatile markets. This helps them achieve their goals, which of course is why they came to you in the first place.

Rebalancing and benchmarking

Buying losers and selling winners can be tough when emotions are involved. But enormous value can be added via rebalancing. Show clients how this works in your marketing. Make it simple.

But none of this is any good if people can’t measure their progress and evaluate your offering to what they are achieving on their own.

What are their risk exposures in a concentrated portfolio compared with a more diversified approach? What is the cost leakage from excessive turnover?  To what extent are they paying for information that is already in the price?

Showing clients this comparison is a significant source of value-add and is keenly appreciated by people who typically are too busy to pay attention to that detail.

Live above the line 

For those other services, value generally starts to become more intangible, so we must build our EQ muscles and know when to ask the right questions.

Say you have just implemented an estate plan. While no one enjoys receiving a big bill, focus the client on why they did it. So you might ask: “Having thought about implementing an estate plan for years, how do you feel now that it’s finally in place?”

In looking for words to encapsulate your client value proposition, road test your version against these: “Know me, know my family, understand me, help me, simplify me, de-clutter me, reduce my anxiety”. These are the best guideposts you can have.

Under this framework, you ask profound questions that move the discussion beyond a two-way to a multiple-angled discovery process in which the couple find out new things about each other and even about themselves and what they value.

By bringing the conversation back to the question of whether clients are on track to achieving their goals and showing them visually using a cash-flow modelling tool, you will have a better chance of keeping them engaged and disciplined.

The End Game

Customers in this approach are more likely to become clients. Review meetings become regular progress meetings – looking through the windscreen rather than in the rear-view mirror. We become client-centric, not compliance-centric.

Whatever the economic environment, it is now all about delivering and demonstrating value. So tell them, show them. People won’t know what great financial planning looks like until they experience it.

One comment on “The value of advice: A playbook”
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    David O'Donnell

    Great article, beautifully (in my opinion) articulating the essence of financial advice. If we could get the corporations act re written to define financial advice such that it also does not put ‘product at the center of the conversation’, the parts would fit together a lot better.

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