Advise or get out of the way

“Adversity is the first path to truth.”

Lord Byron

Earlier this week, Gavin Chappell from Strategic Wealth Solutions – one of our clients with two offices in Sydney – rang me on his way home.

“I was reminded today why I love my job and this business”. He was upbeat as he related his meeting with a new client. This lady had a couple of small businesses in southern Brisbane which were struggling financially. Her marriage was also hitting the rocks, causing great uncertainty in her personal life, in particular the immediate ability to continue funding the secondary education of her three children.

As Gavin finished the meeting, she said “… it’s been ages since I felt financially confident – thank you. Things might actually work out.”  As they devised a possible financial direction forward during the meeting, she’d shared her financial fears and shed some tears.

This lady hadn’t expected to dump all her financial anxieties on Gavin and his team. Gavin and his team, however, insist on a complete understanding of the circumstances, values, fears, and financial complexities clients face – otherwise they can’t be the advisers they aspire to be.

And what’s more, they love that part of their job. Really love it.

With Christmas upon us again, it’s opportune to reflect upon the road ahead for advice firms and what we must do to secure the best returns for shareholders, our staff, our clients, and ourselves.

Way beneath the noise, margin calls, locked up mortgage funds, and media hysteria about the worst crisis since our last crisis, lays the inescapable fact that most advice firms have shed their original reason for being: providing advice to clients.

Clients too often represent faceless renewal income streams, not relationships. Some advisers (both fee-based and not) still claim their most profitable clients are those from whom they receive a trail income, but never hear from. They fail to see the irony of calling themselves advisers.

In these times of adversity, I fail to see how mass e-mail campaigns of information can provide the advice, re-assurance, or most importantly, the attachment that our clients are seeking. True advisory firms like Gavin’s know that client relationships aren’t enhanced by clear communication, but by small and consistent moments of attachment.

Think about it. Are you really attached to your real estate agent because they fill your letterbox with notices of local listings? We can’t provide a sustainable, trusted relationship with our clients unless we are in sync and attached to the fundamental financial issues that affect them. If we aren’t attached we can only ever provide a compliant product or process, and we shouldn’t kid ourselves and our clients by calling ourselves advisers.

What should we do in 2009 if we really want to prosper and grow as an advice firm?

Decide on your market

Firstly, make a considered decision with your fellow directors as to which market you want to work and prosper from – the relationship advice market or the transactional advice market?

The relationship advice market focuses on helping clients make smart decisions regarding their financial lives. The transactional advice market is about providing appropriate and compliance products or processes for one-off financial circumstances in clients’ lives.

If you have less than 50 staff, be very careful trying to do both. Unless you’re a clear market leader in a very specific market niche, it will be increasingly difficult for smaller financial firms to grow a corporate super, group risk, mortgage book, or equivalent low-touch, high volume base of transactional clients, alongside a high-touch, low volume base of advice clients.

Reconfirm your client proposition

Secondly, if your decision is to focus on the relationship advice market, reconfirm your client proposition. Too many advisers in this marketplace forget they are the adviser.  Have your clients undertaken the study that you have or had the experience in the marketplace you have?  Have your clients invested as much as you have in research, training, and skilling? Do you fundamentally believe that their circumstances need any corrections? Then why do we so often let them take the adviser role?

You wouldn’t insist that the experienced surgeon about to cut into your dicky knee should follow your advice on the procedure because you’ve read a bit on the internet about surgery for stuffed ligaments, would you?

Notwithstanding the ‘unreasonable fear threshold’ which logic can’t compete with, in this market there’s a danger of letting clients be their own advisers because they’ve read the papers, listened to their mates, overheard conversations at parties, or been glued to CNN.

Even a slight understanding of behavioural finance (and knowing that our media only want to sell more media while they masquerade as experts for the masses), will tell us that this marketplace will pass. You are the adviser – remember that and stand up for it, otherwise you will fall for anything.

One so-called adviser complained to me last week about how tired he was of continually defending his advice, saying it’s all about ‘swings and roundabouts’. He claimed he makes all this money in the good times, aware that he earns his money in these tiring times even though his revenues (because he is fee based) are lower. Doesn’t sound like the foundations of a good advice business to me?

These advisers see their role as ‘plugging the holes in the dam walls of sentiment’, hoping they will hold. Worse, they limit their role to that proposition. They aren’t insisting in a review of the first principles that underpin the client-adviser relationship. They don’t revisit and rekindle thorough understanding of the long-term financial complexities that underpin the adviser-client relationship.

Current adversity is the best opportunity true advisers have had for quite some time to reassert the value that they add. Clients are seeking financial leadership more than ever. If they are telling you that they ‘just want to sit tight’ I challenge that you probably are not the principal adviser in their eyes. They obviously aren’t valuing your expertise to help them through the threats and opportunities of the current times.

You’ll never alter the impressions of some of your clients no matter what you do, but there are clients and prospects in this market who represent your new advice future, who are seeking clearer directions, who want to be held accountable to a plan that maximises the probability of achieving everything of importance to them in their financial lives.

Firms like Gavin’s are prospering in these times. They’re getting great referrals and looking for advisers to help them handle the load of new work. They are even lifting their fees. These are the best of times to be building a great advice business – don’t let them pass by.

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