A blueprint for advice in 2020

Recently my six-year-old son Benjamin and I were reading a bedtime story about dinosaurs when he stopped me and asked, “Dad, what happened to the Tyrannosaurus Rex?”.

So we started talking about what happened to dinosaurs and the idea of extinction and how some animals have adapted over the centuries to their conditions.

This whole conversation was a trigger that got me thinking about two key issues.

1. How do we learn and how do we retain the joy of learning new things?

2. If we stop learning and adapting, what are the consequences?

These are pretty fundamental questions for all of us as human beings; but from a financial services point of view it really does require a debate, because so much of the future is focused on the joy of learning new things and accepting that knowledge can become obsolete.

Occasionally we also have to ‘unlearn’ things because it’s all plain wrong, and history is littered with examples of this — the strongly-held belief the earth was flat is a classic example.

Advice in 2020: evolution or revolution?

The advice profession has come a long way in the past 20 years. It’s clear that the need for advice is only going to increase.

Indeed, Minister for Superannuation and Corporate Law Nick Sherry said at a recent address to the Association of Financial Advisers (AFA): “Financial planners are in great demand these days. This is not surprising given the increasing wealth of Australians.”

The key drivers of this demand are that Australians are more committed to building, managing and protecting their wealth.

So if demand is only going to grow, a key ingredient will be adviser education, training and retention.

So let’s start the debate. The central question is, what role does education play in moving the advice industry forward?

Perhaps the best place to start is with our clients. When they step into a relationship with an adviser they are making a key decision for themselves, their families and their businesses. They are entrusting their future goals and aspirations to this advice relationship. So this contract of trust is based on the following key issues.

1. Does my adviser understand what’s important to me and what I want to achieve?

2. Do they have the skills, knowledge and competence to take me on this journey?

3. Do I feel comfortable and trust this adviser and their practice?

As advisers, we need to be able to demonstrate that we can continually answer yes to all of these questions. Why? Because the advice relationship needs both adviser and client to be fully engaged in getting the best outcomes.

This is why a commitment to lifelong learning and adaptation is so important.

The only way this industry can continue to deliver consistently good outcomes to clients is for advisers to continue to learn, develop their skills and keep up to date with the latest developments.

The AFA would argue that education and learning is the key ingredient to lifting the standard of advice outcomes for consumers. The AFA policy on education argues that a combination of the following four pillars will lead to better adviser practices and thus better client outcomes:

> formal learning;

> peer-to-peer learning;

> on the job experience; and

> ongoing professional development.

National adviser curriculum

As the advice profession has evolved, so too has the curriculum. The technical content has come to the fore and the profession has championed these skills.

However, what we have created is a profession that is underweight in client engagement skills, and that which the medics call ‘bedside manner’ has been replaced with a detailed knowledge of tax rates, for example.

This is useful knowledge, however, what’s required now is a rebalancing of the national adviser curriculum.

We as a profession need to begin with the end in mind. Here is a simple rule of thumb: if I were to refer a close family member to an adviser, what kind of experience and outcome would I want them to have, and thus what kind of skills would this adviser and their practice require?

This list is a start, but clearly not exhaustive:

> strong numeracy skills;

> strong client engagement skills;

> strong technical skills in area of specialty;

> clear understanding of markets and products;

> coaching and mentoring skills;

> detailed product knowledge;

> strong client empathy skills; and

> strong business management skills .

I am very optimistic about the profession rising to the challenge. I have worked with and seen the way in which advisers adapt, change and grow to meet all kinds of challenges.

Enthusiastic young Gen Xers are joining the industry in droves and it is our responsibility to channel this enthusiasm and help them be the best they can be. They are the industry’s future.

I have also seen seasoned players challenge themselves, change and have lightbulb moments as they seize their options and opportunities. They, too, are a key part of this profession’s future.

So, like Kevin Rudd’s 2020 Summit, we need to gather our ideas, look to the future and start building today for the challenges that lie ahead. All industry participants have a key part to play.

Richard Klipin is the chief executive of the Association of Financial Advisers.