Idealist: Sales culture perverting advice

The sales and funds under management-based culture of financial services is without question the major factor that prevents financial planners from being recognised as professionals.

Until those who sit atop large financial services businesses alter their short-term business expectations, financial planners will never be broadly accepted by the community as true professionals.

Leaving aside for just a few moments the issue of quality of advice, there is a long list of matters that simply give consumers reason to be suspicious about the advice they receive from financial planners.

There are trail commissions, soft dollar commissions, upfront and exit fee investments, and then there are the conflicts of interest between some advice givers that are also the product manufacturers.

While we’re on the subject of conflicts of interest, it is notable that financial planners are often quick to criticise the property scam typical in south east Queensland where the property developer also markets the properties and owns the mortgage broking firm — all without disclosing the incestuous nature of such conflicts to the potential purchaser.

Yet in our midst, there are financial planners and their employers that continue to fail to disclose product and advice conflicts.

While sections of the financial planning community speak the language of sales people, the goal of broad community recognition of planners as professionals will be unattainable.

The sales culture that pervades financial planning and financial services generally is irreconcilable with the goal of being recognised as professional. Words and phrases such as ‘business written’, ‘number of clients signed up’, ‘prospects’, ‘contact calls made’, ‘upfront commission’, ‘trails’, ‘multiples’, ‘funds under management’(FUM) and ‘soft dollar commissions’, are all anathema to a goal of professionalism where clients come first at all times.

The culture of financial planners and planning firms measuring their success based on financial ‘notches in the gun’ such as FUM and number of clients is very much adrift of the essence of achieving success for clients.

People are incredibly perceptive and have far more intuitive knowledge than any so-called business building coach would give them credit for.

Fundamentally, the only coaching required for financial planners is to simply do what’s best for the client.

All the coaching about commercial benchmarks and targeting FUM per client and per planner amount to nothing in front of the client.

Quite simply, happy and contented clients tell other people who, over time, may themselves become clients of the planner.

The point of wanting to be seen as professional is that when the emphasis moves from what’s in the best interest of the planner to what’s best for the client, the likelihood of the prospective client becoming a client increases dramatically.

Yet the large financial services businesses, which have ridden on the coat tails of the enormous efforts by very many individuals to advance toward professionalism, continue to measure the success of their planners by how much new business they write and how much FUM they have in a purely sales-based culture.

Enormous pressure is brought to bear upon people, many of whom I am sure would have thoroughly professional intentions if only they were given the opportunity (read time and resources) to provide truly professional services to clients. Service that is based around the ongoing care of people who put their trust in the planner only to see, in many instances, that planner disappear out of their life, failing to meet sales targets.

It’s way beyond time for the monolithic organisations to decide whether they want to provide genuine client-oriented, ongoing professional services to their customers, or whether they simply want to be product sellers.

Either way I don’t mind, but if they simply want to flog products they should make it abundantly clear to their customer that ongoing service with a familiar face meeting with them at least annually is not part of their service offering.

If these organisations want to be seen as providing committed, professional and client-centred services, they need to back off on the sales pressure placed upon their representatives.

These planners need to be given time (perhaps several years) to convert transaction-based businesses into ongoing service businesses.

These planners need to know that when they wake up on January 1 each year, there is a high degree of certainty that the ongoing service they provide and subsequent fees paid by their clients will keep them employed for the year.

These organisations should see such a conversion, from sales to professional ongoing service, as an investment in the future success of their businesses and in the lives of their employees. All of which should be extremely good news for shareholders with long-term outlooks.

Too many truly professional financial planners deserve much higher recognition than to be simply swept up in community perception that financial planners are just sales people.

They deserve a commitment from the big end of town to change the sales-based culture that is grabbed upon by the media whenever an investment crisis occurs.

They deserve not to be maligned by the recurrent ‘shrapnel’ of presumed association whenever the media runs bad news stories about financial services.

In itself, financial planning has matured way beyond the early product sales focus of the 1980s.

Yet much of what we do still sends a message to the community that nothing has changed and that all we are about is product sales and commissions.

How we act and how we see ourselves has a major impact on how others see us.

The basic ingredients, of education and professional standards, for professional recognition and respect are in place.

All we need to do now is have the confidence to move forward to true professional recognition by the community and have the confidence and patience to move beyond pressuring financial planners to sell products, to an environment of true professional commitment to the client.

Financial services needs a cultural change. A change that cannot be imposed by the Financial Services Reform Act, the Australian Securities and Investments Commission or the Financial Planning Association. It is a change that must come from within the sector itself.

It is a cultural change that requires an investment of time and patience by all who have their commercial lives driven by sales of product.

It is an investment in a culture that, if achieved, will one day see financial planners recognised as true professionals in the Australian community.

Ray Griffin is a Tamworth-based planner and former chairman of the Financial Planning Standards Board International CFP Council.