What does it mean to prove value as a financial adviser? The answer is less simple than "money in, money out." In the era of robo-advice and the abundance of online information, proving value as an adviser to a client means more than investment success or a basic explanation of risk and reward. As we move into 2019, what are the key value takeaways?
According to Deloitte's 2019 Banking & Capital Markets Outlook Report, "the nature of client demand seems to be shifting rapidly," with a market wanting "bespoke, value-added services, such as seamless connectivity and proactive intelligence."
A client can easily enter their financial numbers into an online calculator and see how their fortunes will fare in theory. But what about more complex questions? Questions that clients don't even know to ask? Here is where "bespoke" advice is sought-after.
To better understand what we mean, we'll use the word "bespoke" in a more familiar context: clothing.
Let's say you're looking for a custom-made outfit, and you've acquired enough money to create the getup of your dreams. Which would you rather: select and buy the fabrics, purchase sewing lessons, and create the clothing items yourself? Or, would you rather collaborate with a skilled tailor to whip up a "bespoke" outfit?
Just as a quality tailor is more than the sum of building an outfit, so too is a financial adviser's role much more than plugging in and spitting out numbers. Now, it's time for advisers to prove just that and turn up the heat in 2019.
Clients don't just want to know they're safe - they want to be understood. They need, as Deloitte points out, a "proactive intelligence" from their financial advisers.
John Rook of Kench & Co Financial Services attests to the importance of catering to the whole client:
"What we always try to do is be in a position where we know almost everything about our clients' situations. We know how they'll feel and react to things, more than they'll ever understand. People latch onto this. It's more than holistic, it's all-encompassing. It's the whole person we deal with."
Knowing clients on this "all-encompassing" level can help advisers assist their clients proactively, acting as close to a crystal ball as possible. The more comfortable clients feel with advisers, the more able they are to trust them with sensitive information in the name of creating a bespoke solution.
Deloitte's report highlights that when it comes to wealth management, there is a "continued movement toward fee-based vs. transaction-based relationships." Fee-based wealth management requires shifting the focus away from products and more to a longstanding relationship with the client, building enough trust to withstand market storms.
"We act as our clients' advocate, sharing our knowledge to help them plan ahead and live life on their terms," says Moira O'Shaughnessy, of Financial Planning Corporation. "It's about service, not sales".
The desire to get the client more involved is becoming increasingly popular. For instance, Architas recently launched digital adviser tools to allow clients to more fully comprehend their investments. Deloitte's report mentions that with regards to investment banks, "a fundamental rethinking of the client engagement model should be considered: a pivot from product orientation to a client-centric, bespoke delivery of services."
Just as the role of a customer's opinion in a commissioned outfit will vary from customer to customer, so too will clients' interest in their financial plans alternate from client to client. However, the trend of clients taking more responsibility in their plans seems to be on the rise.
While this veer into client engagement is a good start, to truly understand a client goes far beyond knowing their risk tolerance or explaining the process of investing to them. Gauging a client's appetite for risk still considers the client in the context of the adviser's terminology. Clients don't necessarily have a single "attitude" toward investing or finance in general.
What can truly captivate the client is letting them choose their goals, then helping them design a feasible path toward success. As Rook mentions, the idea is to know the client on a complete level, to be able to anticipate what they need before they need it. Not to make them understand the intricate details of investing.
O'Shaughnessy explains that it's important to understand a client's world: who and what matters to them. Lifetime cash flow modeling helps bring this abstract to life. A solid financial plan will also support clients in exploring their interests: travel, classic cars, boats, art and philanthropy.
Delivering on stability and passion? That's proving value.
One caveat of this more intensive objective is that it does not necessarily provide instant gratification for the client.
Rook says, "It's a gestation period. It may be a process that takes months, if not years."
So where does the role of technology come into play during this long process?
According to Deloitte's report, "While digital advice platforms are capturing a greater share of assets, the existential threat from robo-advisers… is slowly vanishing."
So, technology is now passé and we can all go home sans any new solutions, correct?
Not exactly. It's not that technology's role is moot; it's simply more integrative. Deloitte's report continues on to write, "…banks can embed digital advice more seamlessly into their current offerings." So too can advisers.
This oft-called "hybrid" model of "robo-advisers" and human advisers shouldn't really be considered a hybrid model at all. Instead, more firms can and should incorporate technology into their practices. Financial modeling solutions provide visually arresting results for clients, thereby enhancing client confidence during a slow burn process.
Says Rook, "Technology makes my job easier. I often say to people when I use Voyant, ‘This is your financial plan, what do you think of it?' It's not mine, it's yours."
Moreover, technology can automate processes for advisers, freeing them up to work on other aspects of financial planning. As Deloitte's report writes, "'Smarter' risk management… Generally requires not only better technology and analytics to spot risks before they bubble up but also processes, preventive controls…"
On a basic level, technology can also make a company's basic operating infrastructure more efficient. Deloitte's report states, "Banks have been at the forefront of digitization for a while now and continue to spend billions of dollars in modernizing their technology infrastructure."
One reason advisers may be resistant to technology is the idea that it exists solely to replace an adviser's job. However, as Deloitte explains, "…technology alone is not a panacea. As technology transforms the nature of work, incumbents should not lose sight of upskilling their talent."
Technology exists to better advisers, not vice versa.
As we know, when the clock strikes midnight, nothing radical happens. However, moving into the new year, advisers can remember the following:
Value is more than numbers - true understanding of the client is key.
Though the degree will certainly vary, clients can and should get involved in the financial planning process.
Technology is a friend, not foe, and should not be considered an opposition to advisers, but a necessary component of a healthy financial planning business.
