Financial advice must serve, not sell

I’ve had the pleasure of meeting many financial advisers throughout my career and was one for 16 years. Most of the advisers I have met are obsessive about the value of advice and have a passion for their clients unrivalled by most other professions. 

They spend more time than almost any other industry trying to get to know their client. They have deep conversations to understand what is important to them to help them achieve their dreams. They keep the most precise notes that detail exactly what the client wants to accomplish in life. Then, it gets locked in a filing cabinet and replaced by documents that are unintelligible to even the smartest high net worth clients.

The customer experience has, in the main, been ignored. Clients engage with their adviser once a year in a people-dependent process anchored to product. This puts more pressure on the front office to force a square peg (the client experience) into a round hole (product-led technologies). Furthermore, the process requires a significant amount of box-ticking and compliance to meet ‘know your customer’ and ‘best interest duty’ requirements.

What became clear to me many years ago is that this industry has not supported advisers. Instead, financial products remain at the core of the advice proposition, with technology focused on middle and back-office functions. 

Further, if all you read were the industry press, you would think that selling the same thing to every client (managed accounts) was the solution and, by doing so, you would have a better business.

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Have you ever wondered if this is why we see increased regulation and compliance requirements in this industry? 
It’s not the adviser’s fault. It’s the deck of cards that advisers have been dealt by a product-led industry intent on keeping them focused on sales, not what’s best for their clients.

INDUSTRIES SELL, PROFESSIONS SERVE

On a recent call to New Zealand, I was reminded that we are still an industry, not the profession we deserve to be. Why, because industries sell, and professions serve.

A profession is a vocation founded on specialised education and training. The purpose of which is to supply disinterested counsel and service to others, for direct and definite compensation, wholly apart from the expectation of other business gain. Professions include things like doctors, dieticians, psychologists and more.

While industry refers to a group of companies and activities involved in the process of producing goods or solutions for sale. Think of industries like retailers, fast moving consumer goods and entertainment.

When I see my doctor or dietician, they check my meds, heart rate, and blood pressure. They listen to what is happening in my life. And only then, once informed, will they make a recommendation to help me lead my healthiest life.

When I joined this industry, I was trained to sell. I was taught to be a butcher. Now, I love my butcher. Of all the weekend interactions I have, my butcher is the most sincere and cheerful person in the community. He knows more about me than any other retailer I deal with as he spends time getting to know me.

But when I go to see my butcher, he will sell me the best piece of meat they have. He is never going to suggest I go and get some fresh fish. He’s never going to say; you don’t need any more meat as you are packing on the pounds. He’s going to sell me meat regardless of what is good for me. 

Knowing what we’re going to sell a client when they walk in the door is the fundamental problem of this industry because that is selling, not serving. More importantly, clients are left wondering what we do. We have little evidence to show their lives have improved from the value of our advice, outside of meaningless performance benchmarks.

A profession makes money because they care, and their clients can see both the tangible and intangible value of what they do. They love that every client that walks through the door is different, and their job is to listen and then tailor a solution to meet their needs.

Now, nothing would make me happier than to see our profession start to achieve its nobility. But for that to occur, technology needs to start supporting advice, not sales. 

Technology has to bring to life that purposeful conversation that occurs in every first advice meeting. It has to measure the output of our advice and help advisers anchor their experience in something they can control – helping their clients lead their best lives. And, advisers need to invest in the right technologies that put the client at the heart of their experience, not the product.

Lastly, there is little evidence to support that selling every client the same thing makes you more profitable. We continue to deliver profit margins that are way below what our profession deserves. I believe that relates to the fact that we have focused on compliance around product sales, not the customer experience. 

And, technology has followed suit. It has and continues to support product sales, like automating records of advice (RoAs) and associated compliance. It does not help advisers with what they should be paid to do, and that is to provide strategic, product-free, independent financial advice.

WE HAVE BEEN ENGAGING THE WRONG SPOUSE

One final point that is critical in changing the prism we see our profession through. We need to engage both the chief financial officer (CFO) and non-CFO spouses. 

Forever it has been the CFO spouse who completes the fact find, risk profile, participates with the adviser, and logs in to see how they are going to some meaningless benchmark. The same spouse questions things when things don’t go to plan. Arguably quite rightly, as we never had any mathematical chance of creating outperformance.

But, it is the non-CFO spouse who runs the family. Who worries about the family’s and their own wellbeing. Who wants peace of mind that things are on track. Yet, we’ve been unintentionally disengaging them. Creating complexity that leaves them unsure of the value that advisers provide.

Imagine if, instead of focusing on financial performance, we engaged them around their wellbeing. Brought that to life and could prove that everything they are doing today will allow them to live the way they dreamt of in the future. Imagine them telling their friends how their adviser helped them live a better life aligned to their values. 
How deeply they understand us, that we cried with them and that you need to see them. That’s more powerful than the markets doing 6% whilst we did 7%.

Now imagine the CFO-spouse telling their friends about that same meeting. That it created a discussion with their spouse that they have not had for a long time or better, never before. And it’s brought their family closer together because of it.

The value of advice is advice, not sales, and that advice needs to be 100% associated with improving lives. If you do that, then the advice is very valuable and highly profitable. Clients will quickly be able to see the value as it will have a direct impact on their lives. With performance measured against what they achieve in life and their overall wellbeing.

You can’t pretend you know what the market is going to do. Your job is to help people make great decisions at turning points in their lives. Turning points that happen every three to five years and to deeply understand what drives them in life so you can help them make great decisions that will be life changing. 

Let’s not allow those fantastic conversations you have with your clients to live in a filing cabinet. Let’s not have our results anchored in a performance benchmark we cannot control. Your clients are driven by purpose. They want to live a full life, not die rich. Your job is to change plans, not write them. If you get that right, you will start to see there is a new game in town. A game that’s centred purely on the client experience.

It’s time for financial advice to become the profession it deserves to be. To do that, we need to decouple the process, technology and experience from product, and better align it with what clients truly value in life. 

So, let’s make the client’s values and goals the picture cards in a new deck, with the rules anchored to the client experience. 

Santiago Burridge is chief executive and co-founder of Lumiant.