In the financial planning community, almost all firms are now starting to focus on the value we can add to our clients’ lives. Firms who are serious about success and growth over the next 10 years should review their value proposition and their place in the market going forward. Here are 5 simple questions we should ask ourselves to assess the value we are adding as financial planners
Are we providing Investment Management or Investment Behavioural Coaching?
In the modern world of online investment platforms and low-cost investment management, clients are less likely to be impressed by model portfolio and passive investment allocation. Good advisors will have to offer something different in order to provide a service clients are willing to pay for.
The top tier financial planning firms have strong processes in place to weed out their own internal behavioural biases and act as an impartial and skilled behavioural coaches. This is the key to adding long term value to clients from an investment management perspective. We have to set aside our own biases, whatever they are, and give clear guidance to our clients. In the ongoing advisor-alpha studies carried out by Vanguard, the estimate it to be worth 150bps per annum to our clients.
Are we adding expertise and resources in areas not usually associated with financial planners?
It is essential that financial planning firms offer advice in all areas of our clients’ financial lives. A strong financial plan must include tax planning strategies. A financial plan isn’t going to be durable if the tax implications are detrimental to long term financial success. Firms either need to educate senior advisors on tax matters, hire tax advisors, or establish strong links with tax specialists.
Legal matters are also integral to any good financial plan. Whether its Enduring Powers of Attorney, trusts or estate planning, we can’t avoid the legal aspects of future plans. Again, there needs to be convenient and integrated access to legal advice for any financial plan.
We should encourage clients to introduce us to their other professional service providers so that they can assist with the formulation of financial plans. Building trust with these professionals can lead to stronger links between firms.
Are we investing in new ways to communicate with our clients?
Clients are demanding better information, better access to accounts and more convenient ways to do business. Are we giving good online access to our own portal/CRM system, and is that system fit for purpose? Are we giving clients access to tools such as VoyantGo in order to allow them better transparency on their financial plan? We use a superb CRM package in our firm, which clients have access to. It has led to clients feeling less need to call us for values or activity updates because from their perspective, they can see our activity on their account, details in real time without having to pick up the phone. Clients buy into the system and become reliant on it for information, which makes them more likely to stay with us.
Are we truly embracing cash flow planning, or just using it as a sales tool?
It is no longer enough to make general assumptions with clients around inflation, growth and linear projections. Clients now want to see a more sophisticated level of analysis and planning when it comes to their finances. There are so many complex decisions to be made, they want to know that their financial planner has the expertise to put a comprehensive plan in place.
This is impossible to do without good tools. Cash flow planning tools can no longer just be used as a sales tool to encourage clients to increase their savings or pension contributions, or add some life cover. We must use them to build a complete picture that clients can understand.
Have we reviewed our remuneration structure to offer value to all clients?
Flat percentage remuneration structures have been a bug bear of mine for may years. I don’t believe in the idea that our wealthier clients subsidise our lower ‘value’ clients. Increases in disclosure, along with the development of low-cost online advice, will put increased pressure on this old model.
I can see some firms starting to move to a flat fee, or tiered fee model, which makes much more sense to me. Clients want to see their advisors add value, and advisors want to be paid a fair fee for the value they add.. Having fixed fees allows advisors the freedom to move away from asset gathering, and possibly even away from regulated product advice all together. They can then focus on exciting new ideas like monthly subscription models and the profitably advising younger clients. The market for high earning, low asset value clients in their 40’s is largely untapped by the financial advice community and offers massive opportunities. Those clients are being left to their own devices in many cases, where they could benefit from all of the points I’ve mentioned above.
Dave Quinn is Managing Director of Investwise Financial Planning, a fee-based financial planning firm based in Dublin City Centre, Ireland.
