It’s interesting how the world of financial advice has evolved. Remember when advisers used to hang their hats on picking the hottest funds or boasting about investment performance? Well, those days are pretty much over.
These days, more and more advisers are shifting gears, putting their energy into comprehensive financial planning. They’re sitting down with clients, getting to know them and their goals. It’s become much more about the big picture.
But here’s the thing – even with all these positive changes, there’s still this nagging feeling in the industry. A lot of people think advisers could do a better job explaining exactly what they bring to the table. It’s like, “Hey, we’re doing all this great stuff for our clients, but are we really getting that message across?”
So, what do you say we dive into this a bit? Let’s chat about what modern financial advice really looks like and why it matters.
The Four Pillars of Financial Advice
In this evolving landscape of financial planning and wealth management advice, four key categories have emerged as cornerstones: Building a financial plan, putting the plan into action, ongoing service, and soft skills. Interestingly, a recent survey by PortfolioMetrix found that ‘Soft skills’ received the highest percentage of importance, a fact that might not seem obvious at first glance.
- Building a Financial Plan (30%): This involves understanding the client’s financial situation, goals, and risk tolerance to create a personalised financial plan.
- Putting the Plan into Action (20%): This is the implementation phase.
- Ongoing Service (15%): This includes regular reviews and updates to the financial plan to ensure it remains aligned with the client’s goals.
- Soft Skills (35%): These are the interpersonal skills that advisers bring to the table.
While the first three pillars are fundamental to any financial planning strategy, the value of soft skills can often be overlooked. However, these intangible and unquantifiable skills are what truly set an adviser apart.
The same survey revealed some interesting insights about what advisers perceive as valuable to their clients. Empathy was the standout winner, with 76% of respondents including it in their top 5. Understanding a client’s life goals secured second place with a 49% hit rate. “Simplify” and “Peace of mind” shared third place with 47% of the votes, and only then came “Building a Personalised Plan” at 41%.
Let’s start by looking at Empathy – understanding what is important to our clients, gaining their confidence, and building trust. This understanding forms the foundation of the adviser-client relationship. A client will know if you truly care. You can’t fake it.
We understand our clients’ life goals when we provide them with the opportunity to discuss their concerns and their dreams. As the relationship grows, a good adviser becomes not only a sounding board but a confidante, someone clients can turn to for advice on all aspects of their lives. This includes managing expectations and delivering hard truths when necessary, even if it’s not what the client wants to hear.
One of the most important soft skills to me is to ensure that I consider all aspects of my client’s life in their financial plan. In this case, I consider the entire family and help navigate them through life events, including Marriage, Children, Divorce, and Death.
Encouraging spending is another area where we can often add value. This might sound counterintuitive, but after a lifetime of saving, our clients should sometimes be encouraged to spend and enjoy some of their hard-earned money, for example on a bucket list. We understand that if our clients have dedicated their lives to work, they may need assistance to feel guilt-free about spending money on their new hobby or passion. Detailed cashflow planning alongside an appropriate investment strategy is key to a stress-free retirement.
Finally, working with a financial adviser offers benefits that go beyond just managing money. Three key advantages stand out:
- Peace of mind: Knowing your finances are in capable hands reduces stress and worry.
- More free time: The hours you’d spend managing your finances can now be used for activities you enjoy.
- Simplified finances: Advisers help streamline your financial affairs, making them easier to understand and manage.
The Value of Advice: Perception vs Reality
All that being said, what we as advisers think is valuable to our clients is not always matched by what our clients think. A study by Morningstar revealed a sizable disconnect. Clients undervalued behavioural coaching while advisers overvalued understanding the client’s unique needs and undervalued maximising returns. I’ve come to understand that smooth administration services and implementation are highly valued by our clients.
Whether you’re a potential or current client, understanding how I approach working with you can help you appreciate the value that I (or any reputable financial adviser, for that matter) bring to your financial journey. I hope this short article has achieved that to some measure.
Stay tuned over the coming months for more insights into the world of financial advice. And remember, the value of advice is not just in the plan, but in the journey.
By Janet Hugo, CFP
