Dean Lombardo

Advisers are typically more confident than their clients that they are on-track to meet their goals and objectives, according to a report which has found three things all advice firms can focus on so clients are more likely to be as confident as advisers are in the advice they’re receiving, and the direction they’re heading.

‘The Value Gap’ report published this week by Effortless Engagement shows that clients are typically only moderately confident the advice they’ve received will help them achieve their objectives, while advisers are very highly confident the advice they deliver will get their clients there.

Effortless Engagement founder and chief executive Dean Lombardo tells Professional Planner there are “systemic issues” in advisers’ processes that tend to suppress client confidence.

He says fewer than 20 per cent of advisers update client projections at least annually. Fewer than 10 per cent “continue to demonstrate past achievements”. Fewer than 5 per cent “have a method of evaluating client progression across key advice areas”.

Lombardo says if advisers work within processes that produce regularly updated projections, if they can show in a structured way the impact of advice clients have received in the past, and if they can demonstrate in a robust way that the advice clients are receiving is moving them closer to their goals, client confidence is likely to improve.

But he adds there are processes that advice practices don’t have in place to do it to illustrate these benefits.

“They haven’t got a method in place, for example, just to continue to showcase past achievements,” he says.

Lombardo says these are systemic, process-driven issues within an advice business.

“These are just components that are ready for that client meeting and being able to demonstrate both past measures of success and future probability of success,” he says.

“Goals are dynamic, they’re not static, as it is with life. If we’re not constantly iterating and showing the client that probability [of success], it’s quite easy [for a client] to get distracted… and not be sure.”

Lombardo says that it’s well understood that past investment performance isn’t a reliable indicator of likely future performance, and it’s therefore unwise to make specific promises about returns, but discussions around progress to date – and likely progress in future – can be framed and phrased in different terms.

“They could be goal-based in terms of showing the client what they’ve achieved with regard to their goals,” he says.

“[But] past money behaviour is very much a future indication of future money behaviour. If you want to create more robust plans, and you want to better equip the client to make informed decisions, [then] actually understanding what they’ve done previously better equips you to guide the client through that conversation around future goal planning.”

Lombardo says failing to reflect on and demonstrate past advice successes and goal achievements “limits that future projection and probability of success”.