Ironic isn’t it?

Our industry rigorously reminds its clients not to view past returns as a indication of future returns, but too rarely stops to question if the client’s past desired outcomes are indicative of their current desired outcomes.

Why do financial advisers do this? Isn’t that strange?

Why do they clumsily try to explain how they added value in the past year, without first checking that they are in sync with the whole reason WHY their clients are paying their fees?

Is it because they assume the value they add will be determined purely on how they perform in the beauty parade of investment returns? Is that why they’re paying us all?

Also, isn’t it ironic that because the majority of our clients have investable assets (or superannuation sums) that we assume them all to be investors? Just because I have a garden doesn’t make me a gardener, does it?  

Also, most advisers assume that Australians pay their fees because of their expertise in financial services or products. That’s not why they pay the fees. They pay the fees because they want to achieve their outcomes, not because they want the adviser’s products or services. Most couldn’t care less about your products or services when compared to how much they care about getting their outcomes.

I don’t buy the surgeon’s scalpel or years of experience performing knee surgery nearly as much as I buy her services to get me a healthier, working knee. The surgery and experience as a means to an ends to help me get running again without the pain.

What’s the point of pointing out the assumptions?

Every financial adviser I work with is constantly looking for better, consistent, repeatable, and audit-able processes to add value to their advice clients and thus earn their fees every year.

The really good ones are testing their assumptions about what is value for their clients every year. Yes, every single year.

Value isn’t the retirement balance by retirement date. Again, people are dangerously confusing the means and the ends.

In the product, pre-FoFA, FSR-dominated, past, our industry focussed on knowing the client’s money ahead of knowing the client. This is understandable considering the compliance hurdles every advisers has had to jump through since FSR (and also reflective of the focus institutionally backed groups implemented to mitigate their risk), but another huge assumption about what WE perceived was the value that we had to add.

How do you remove the assumptions?

What does this mean for your major client review discussions with your advice clients?

Consider adding something like the following to the front of every one of your major review meetings (hopefully held annually):

“Look, I appreciate we’ve worked together for (insert period of time), but before we talk about the deails, can we spend a little time going back to the fundamental reasons WHY you’ve engaged our firm? Can we talk again about your most important and fundamental outcomes you seek from a relationship with us as your advisory firm? We don’t want to make any assumptions as we believe it might be beneficial to firstly re-establish and understand WHY we are working together before we discuss WHAT we are doing?”

Let me know how you go?

Particularly does a more disciplined approach to actively remove former assumptions about your client’s desired outcomes help you better understand WHY your clients are actually paying your fees?

What do you think?

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