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Why lifestyle isn't a soft and fluffy issue to valuable advisers
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Financial planners
are at a turning point in the evolution of the profession and must
become more relevant and influential to clients or risk losing the
central advice position, argues Ian Hutchinson. Managing a client's
lifestyle outcomes, not simply their money, will become core to
the future advice relationship, he says.
Still shell-shocked over
recent times when financial planners were and still are under attack
from disgruntled clients reeling from the dramatic loss of capital
and income, progressive thinking planners see this as one of the
turning points in a profession struggling for greater credibility
and influence over a client's financial affairs.
To these forward thinkers,
the current environment is an enormous opportunity to become more
relevant and valuable to their clients, not to feel threatened and
insecure.
If we've learnt one thing
over recent times it is that we know what a financial planner can
control and what they can't. More vitally, clients now know this.
Investment returns and market performance are out of the control
of the planner and the consistent focus of this industry to portray
itself as "investment experts" will become increasingly
transparent.
Advisors have jealously
guarded their "expertise" around asset management and
the ultimate outcome of that asset, investment returns, since the
birth of this industry. Primarily this was due to the fact that
advisors have been paid to do just that: invest and manage the assets
of clients. But financial planners must finally let go of this sacred
cow and accept that their role is far more fundamental and responsible
than managing assets, vaguely suggesting that they have some influence
over investment outcomes.
The ASIC/ACA survey of
financial plans should also impact the way progressive planners
think. The key message from this period is to do a better job in
educating and informing clients about their financial goals and
lifestyle expectations. Financial literacy is ridiculously poor
in our culture and this industry has largely survived on "blinding
clients with science," rather than empowering and educating
them to become more involved with their financial plans. Financial
plans of the future will be simpler, easier to understand and more
meaningful to clients on their lifetime goals.
The investment industry's
simplistic mantra to assuage client hostility on losses is to "keep
your nerve and think long term." This fails to recognise the
concerns and underlying issues of clients and why they invest and
take advice form planners in the first place.
Clients seek professional
advice to gain comfort and peace of mind that they will reach their
goals and desired lifestyles with certainty.
Financial planners exist
for one primary reason: to improve the quality of life for their
clients. How does the industry, as simple financial advisors, achieve
that lofty and broad goal ?
"Financial
planners exist to improve
the quality of life for their clients"
Have we given clients
more confidence or less in reaching their lifestyle outcomes during
the recent particularly volatile period of investment markets?
To become more relevant
in the future, planners need to focus on what they can control -
enriching the client experience. Planners to differentiate, add
vale and be seen as unique need to help clients with their desired
lifestyle aspirations and visions. Ultimately clients pay financial
planners to help them achieve a quality of living; whether that
be saving for retirement or a shorter term tangible goal.
The investment shocks over recent
years have rocked clients and they are now clearly uncertain about
whether they can afford the lifestyle in retirement they originally
planned on, For some clients who have never had confidence that
their financial plan would indeed get them to their destination
have felt rudderless in a violent storm.
New generation financial
advisors know that their role is to empower clients to feel more
confident and in control of their life. This is more than simply
lazy investing of lump sums. Research conducted in 2002 by marketing
research firm Intellectual Capital on the future of advice suggests
that 95% of advisors will be actively helping clients with lifestyle
planning by 2007. The current problem is that there is no methodology
in the formal training of an advisor that helps them achieve this
objective, and not only is the planners, but also the client is
missing out.
Future planners will also
build their advice and position their value around a deeper understanding
of clients' needs and expectations and work to manage the trade
off between these expectations and the actual or desired lifestyle
outcomes.
Ultimately financial planning
is about helping people reach their lifestyle goals, not the dazzling
technical detail of a weighty financial plan. The financial plan
is simply a means of getting there. But along the way clients experience
turbulence and temptation. The new generation advisor will adopt
more the role of coach and mentor to guide clients into better money
management behaviour and to keep clients non track and clear about
where they are more meaningfully headed. That will achieve more
confident, engaged investors than a self serving message about "thinking
long term."
So how can financial planners
redefine their role to become more influential and relevant ? The
key is to have a logical process to understand their lifestyle expectations
and aspirations. If planners have a clearer picture on where a client
wants to go and why, then it is easy to become more central to helping
clients reach the milestones to these goals, and create a win win
for client and advisor.
This is more difficult
than it suggests as most clients know what they don't want, fewer
know what they really do want. They have generally a poor level
of clarity about a vision for their lifestyle and thus, fail to
engage in the financial planning process.
If planners adopt a more
holistic lifestyle planning approach to their financial planning
process, they will find clients more actively engaged in the financial
plan, and ultimately, taking greater responsibility for its implementation
and outcomes. Wouldn't that be a more meaningful future that all
financial planners should aspire?
Many financial planners
see lifestyle planning as a vague, soft and fluffy issue. That's
largely because lifestyle planning is a poorly understood term and,
as a result, there has been, until now, little serious effort in
this industry to embed a true lifestyle emphasis into the traditional
financial planning process. The result is that many planners continue
to work in a vacuum where a client's core underlying needs and expectations
about lifestyle are separated from the technical plan construction,
The future will see progressive planning firms who can integrate
both lifestyle and technical planning into a cohesive, more meaningful
document, a true guide map to a client's financial journey.
Best practice advisors
will change the dialogue they have with their clients, right from
the first introduction meeting to annual review meetings. New generation
planners will ask more questions about lifestyle expectations and
have a more consistent, systemised process to more accurately uncover
what the client really wants. This will allow a client and a planner
to create a much more meaningful and rewarding lifetime partnership.
Financial planners are
like most people: resistant to change unless there is a sufficient
consequence for not changing. That day soon is approaching, when
clients will challenge the validity of a financial plan to give
them comfort and peace of mind. And clients will ask planners fundamental
questions, like "How well do you really know me? How well prepared
are you, your staff and your practice for that day? In fact, how
prepared is this industry?
Ian
Hutchinson (G.Dip.Psy, B.Bus, APS) is founder of Life by
Design®, creator of the New Generation Advisor program and has
built a reputation as one of the leading financial services conference
speakers and program facilitators. Life
by Design® is a lifestyle solutions and management group that
educates, trains and coaches the financial services industry, helping
them attract, retain and engage clients through lifestyle planning.
Ian programs are in demand throughout the world including North
America, Europe, Australasia and even the Middle East. Life
by Design® can be contacted via
www.lifebydesign.com.au
or 61 + 2 9979 4949
For permission
to reproduce this article in whole or in part,
contact Tanya Mottl by phone (+ 61 2) 9979 4949, fax (+ 61 2) 9979
4969,
or email info@lifebydesign.com.au
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