I used to coach a guy I call Adviser Tony.
Nice guy, experienced, founder of a successful advisory firm and well-respected in the advice industry.
Tony once told me that when his clients ever squabbled about how they wanted to spend their retirement monies, he preferred to dodge their arguments while promising his advice will provide sufficient funds, and they could figure out what to do with it.
Adviser Tony typifies the adviser who confuses advice and product value.
The essence of advice is the management and resolution of complexity.
When there is no or little complexity in the client’s life, there is no or little value associated with the advice.
Product advisers confuse the complexity they observe in their recommended product or strategy with client complexity.
It is as different as night and day.
Trained and skilled in their hard-earned technical qualifications, most financial advisers initiate new advice relationships using a due diligence approach often referred to as a ‘fact find’.
The traditional ‘fact find’ asks some goals, hopes and personal preference questions. Still, the gist identifies and assesses the existing financial details, structures and timelines in the client’s financial life. These details become the basis of a plan and advisory relationship.
“Value-Finds” are different
Thanks to compliance, training and product origins, financial advisers’ fact-finds uncover a client’s financial situation to within a dollar.
They are far less focused, trained or methodical in conducting “value-finds” to identify, capture and manage the specific and unique details of the value sought by their clients.
Adviser Tony confidently produces his recommended asset allocations, cash flow budgets, financial re-structures, and underwriting advice using his valuable technical skills.
But the consequences of dismissing the unresolved and misaligned retirement objectives of his disagreeing couples not only reduce Adviser Tony’s value but, worse, reinforces the widening gap and diverging hopes of their lifelong partnership just when they most need advice.
Value for the arguing couple is less about the performance of a technical strategy and more about the support needed to define and navigate a collaborative, forward path that respects the unique value at the heart of each partner’s value-finds.
Product-based advisers like Adviser Tony are essential for clients to lead their best possible financial lives. However, without the skills to identify, manage, advise and deliver the value from client ‘value-finds’, Adviser Tony’s approach is not enough.
Nor is it enough for the impending creative destruction forces of technology that will confront Adviser Tony’s future of advice.
Technology is re-wiring the advice industry creating new levels of transparency, margin compression and client engagement choices, making the 2018/9 Royal Commission reforms seem like a speed bump.
THE MARGIN WARS
The industry funds won the first round of margin wars, pushing the retail funds into retreat and reform.
The technology providers will win the next round pushing every product-based adviser, like Adviser Tony, into reform.
Technology’s insatiable cost appetite, disrespect for well-established market shares, and ability to choke margins in prosperous industries like financial services are proven.
Technology will expose the details hidden in the industry’s soft and long-protected under-belly by attacking today’s propositions at their core – their basis point (BPS) costs.
BPS costs are every financial product supplier’s Achilles Heel supporting expensive manufacturing, distribution and marketing systems built in an era when BPS were invisible and meaningless to most advice purchasers.
Technology will expose bloated BPS costs to become, with transparency, the weapon of first and second choice for distributors of tomorrow’s financial products.
Advisers without a consistent, specific and methodical approach to ‘value-find’, manage, deliver and position a client’s unique value will be fighting margin wars searching for a valuable differentiator.
Tomorrow’s advice models need value-finds and client value in their firm’s DNA, not only today’s fact-finds.
Future advice relationships need to be founded and managed not only upon a technical strategy like Adviser Tony’s. They also need to be based and focused upon the value that has been missing, unresolved, biased, misaligned, unappreciated, suppressed, tampered with, neglected, assumed, imposed or restricted in their lives.
Value-finds are just the start of the core DNA of future advisory firms.
The value is in the detail.
What do you reckon?
Photo credit: Shutterstock_2058379892
ABOUT JIM STACKPOOL
For over 30 years, Jim has influenced, coached, and consulted advisory firms across Australia. His consulting firm, Certainty Advice Group coaches, trains and builds advisory firms delivering comprehensive, unconflicted advice, with fees priced purely on value. He is growing a strong and collaborative community of advisory firms aligned on Australia’s only Certification Mark advice standard for comprehensive, unconflicted advice – Certainty Advice. He has authored four books regarding financial advice with his latest – What Price Value – available now since its release in March 2022.
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