Client Offering – Financial Advice or Financial Care

What a time to be a financial planner.

Our biggest product manufacturers – the banks – are making record profits, thanks more and more to the performance of their wealth management divisions. Platinum’s float indicates that one prominent stock picker believes the market is ripe for listing, and Macquarie Research expects about $80 billion of new retail superannuation inflows – excluding self-managed super funds – for this financial year, well above average levels of $60 billion. Kenyon Prendeville’s Steve Prendeville says every seller of financial planning businesses has many potential buyers.

It doesn’t take a rocket scientist to produce good results in the financial planning industry at the moment. Compared to most other sectors, it’s pretty easy. The only challenge to our success is, possibly, the success itself.

In our Cultivating AdviceTM programs, we are witnessing a fundamental shift in client value offerings. There is growing separation in these offerings, between what I refer to as “financial advice” in one corner and “financial care” in the other.

There are at least three forces driving this split.

  1. The desire to have a flexible client offering that can grow as the firm grows – in other words, ensuring that a firm’s offering in 2008, 2009, and beyond won’t be the same as the 2007 offering.
  2. The desire to have clients’ needs shape the offer, not legislation or the market.
  3. The desire to differentiate a firm’s offering from its competitors’, to attract new clients, and more importantly, draw the best and brightest advisers.

Both the financial advice offering and the financial care offering deliver advice and both usually (but not always) deliver financial products to clients. The key difference is the level of complexity in the client’s financial life.

Financial Care

The financial care proposition is for clients who do not have significant complexity in their lives. They don’t need a lot of analysis or advice. They need to plan prudently for retirement, spread and insure their risks, manage their cash flows, pay their taxes and pay off debts. It will be hard to charge a premium for financial care. In the future it will be commoditised, as will most of the products within its offerings.

Firms that establish themselves to serve the financial care market can be prosperous. They can deliver great value as they meet the needs of their selected clients. The specialty of the planners offering financial care will be diligently serving that market’s relatively simple needs.

Financial Advice

The more thorough approach will be the financial advice proposition. There are already a myriad of terms used for this, including wealth manager, principal wealth adviser, holistic financial planner and chief financial officer.

The causes of financial complexity in a client’s life are as broad as the range of services to deliver appropriate financial management solutions. But one thing is certain about the proposition – it is a broad financial solution, not just the placement of retirement monies or implementation of tax-effective structures, and it will probably take more than one year to implement the solutions, management and habits into a client’s financial life.

A financial advice proposition will attract a premium that a financial care proposition will find hard to match. The greater the client’s complexity and  need for advice, the higher the premiums that will be charged to deliver the leadership, expertise and relationships required to remove, reduce or manage that client’s situation.

These are the best of times …

If you are so busy trying to meet client demand that you can’t experiment with new offerings, you might not have a choice in a couple of years. In the meantime, these are the best of times. Make the most of them.

Image: renjith krishnan /

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