Practice Management: The adviser of the future

There have been many changes to the role of the adviser and the structure, operation and service delivery of advice businesses over the past 20 years. But these changes will be looked on as only minor when we compare the typical adviser of today with the adviser of the successful or dominating firm of the future.

What we used to do

In the late 80s and early 90s, advisers were typically self-employed sales people who often confused their job with a business. Those who experienced some success in this role began employing some help — often someone who could assist them with the administrative duties that came with the job.

The adviser’s focus was on selling a client or potential client a product and typically they were compensated for this by the product manufacturer.

They were responsible for everything that contributed to making the sale and the after sales service: sourcing the potential client, converting the client, providing the required documentation, managing the client relationship, delivering peripheral components of ‘service’ and managing the personnel they may have employed to execute some of the client and ‘business’ administrative tasks.

What we do today

The adviser’s role in a typical advice business today is very different. A typical business today has a number of advisers, one often being the business principal. That role is typically one of multiple responsibilities, which include chief executive, general manager, marketing manager and human resources manager as well as client adviser.

Advisers who do not have ownership in the typical business today are mostly more junior in age and experience but still have responsibility for sourcing new business and often for managing other roles such as junior advisers and/or paraplanners.

The advice focus of the typical adviser of today is limited to the advice capabilities of the business and is often biased towards financial planning.

The adviser typically delivers the advice to the client via a Statement of Advice (SoA), which may include recommendations to see another specialist regarding components of advice the business is not capable of delivering (such as tax planning, insurance advice and estate planning).

Forces that will change the adviser role

A number of forces are already driving dramatic change in this typical adviser role. The most powerful of these forces is the changing client.

According to respected US advice industry consulting firm Moss Adams: “The power of the client is growing: driven by sweeping demographic changes, increased consumer sophistication and greater expectations of service”.

Clients are no longer accepting advice that is not specific to their needs, nor are they attracted to an advice business that does not have an offer that clearly demonstrates the business understands their specific needs.

It is not only in the advice industry that changing and more demanding behaviour from clients and prospective clients is evident.

People in AFL-mad Melbourne were once accustomed to watching their team play on a Saturday afternoon while standing on muddy terraces and queuing for warm beer and cold pies. Now many supporters do not attend an AFL game unless there is a roof on the stadium and the catering and supporter facilities are equal to their favourite restaurant.

People do not accept or tolerate behaviour from others in positions of authority today as they did many years ago: witness the daily revelations with complaints against members of the church, teachers, politicians and senior public servants and others that date back 20, 30 and 40 years ago.

Changing client demands have seen unprecedented evolution in the fast food industry. Who could have predicted lunching on a Mediterranean salad and an apple at McDonalds?

In the past, clients were often attracted to an adviser because they did not know what to do with newly acquired funds. They received these funds after retrenchment, or from an inheritance or an insurance payout.

But the more sophisticated and demanding clients of today are more likely to realise the need for advice because they want to fund the expansion of their business, or understand some of the complexities of being made a trust beneficiary, or protect the future ownership of their assets from a child’s spouse, or transfer their wealth to other family members in the most tax-effective way, or decide whether to purchase an investment property and rent their primary residence or purchase a property to live in.

There is evidence of a fall in confidence of the value provided by advisers after the economic environment of the past 12 months or so. Clients of advice businesses are no longer content with advice on shifting assets from one environment to another. But they still realise they have a great need for advice on a number of finance-related issues.

There is an increasing realisation in the advice industry that only growing businesses and those that acquire critical mass will be able to maintain profitability levels to which business owners have become accustomed. The big are getting bigger.

This is resulting in greater business capacity for the delivery of multiple components of advice. The single dimensional advice business is finding it more difficult to attract new clients and compete with the larger business that is able to employ specialist advisers in tax planning, retirement planning, protection planning, asset acquisition and transfer, business improvement, philanthropic planning and so on. This is another important influence on the changing role of the adviser.

The adviser of the future

So, given these influences, what will be role of the adviser of the future?

In the most successful advice businesses evolving over next three to five years — we label these businesses ‘Dominators’ — there will be three quite distinct adviser roles, each with different business functions, advice specialties and accountabilities.

The most senior of these advisers will be the principal adviser, who is accountable for the conversion of potential clients to clients. They are not accountable for sourcing the potential client though; this is the function of the dedicated marketing department.

But the principal adviser will work collaboratively with the marketing personnel in some of the activity designed to generate new business.

While the principal advisers may have an advice specialty bias, they will mostly be advice generalists. They will work in harmony with other advisers at different levels to clearly identify the client’s advice needs and to provide advice solutions according to the priority needs of the client.

The needs of the client will be determined after some in-depth questioning, discussion and analysis often over two, three or four appointments, not just the brief one-hour discussion that is common today.

Once the advice needs of the client are clear, the principal adviser will work with the senior adviser and associate adviser to determine the appropriate priority advice and prepare a presentation of that advice for the next client appointment.

The presentation of the advice will not be made via the SoA. Of course, that will be provided as it is a regulatory requirement, but the SoA document will not be the vehicle used to present the advice. The principal adviser will be the lead professional in communication with the potential client up until the time they become a client.

The client relationship is then managed by the senior adviser who will be assisted by the associate adviser. The senior adviser is accountable for retaining the client relationship. They are responsible for proactive and reactive communication with the client, for conducting progress review appointments and co-ordinating the introduction of other specialist advisers as other components of advice become a new priority for the client.

The associate adviser is the most junior of the professionals working with the client.

This role is responsible for providing the support to enable the principal adviser and the senior adviser to successfully execute their role.

Different levels of experience in this role will determine the actual role responsibilities — the most junior of the associate advisers will have more client administration responsibilities while the most senior will have more responsibilities typically carried out by a paraplanner today.

In each of these adviser roles, the focus in the Dominator advice business of the future will not be on money — it will be on the client. The advisers will make their decisions from the client up, not the business down.

They will be totally client-centric and will spend a lot of time working with the client to understand — and help the client understand — what is important to the client and what their priority advice needs are.

They will not limit their advice to the ‘wants’ of the client and will become used to saying ‘No’ to potential clients who only want a solution to a want they have determined is a priority.

The adviser of the future will transition away from a near exclusive focus on assisting clients in accumulating enough wealth to fund a future lifestyle, fund children’s education, maximise social security benefits and protect the family due to income loss or poor health or death.

The advice business of the future will need specialist advisers in these areas, but advisers will also need the skills and knowledge related to tax law and planning, estate planning, business structures and consulting, charitable giving, home and property acquisition and funding, asset protection, and long-term care.

The traditional adviser responsibilities of lead generation and marketing will be taken over by the marketing manager; they will be accountable for introducing the potential clients to the firm in numbers that will support the exponential growth objectives.

The Dominator advice business will generate 100 to 250 new clients a year, not the 10 to 15 of the typical business today.

Business management and human resource management responsibilities are also removed from the adviser role, whether the principal adviser is an owner of the business or not. As the organisational structure in table 1 depicts, the successful advice business of the future will have dedicated roles accountable for these functions.

Same title, different role

According to Moss Adams: “Change will not only require more people and new positions, it will also require adaptations in the traditional definition of an adviser”.

The successful advice business of the future will have a totally different mindset with regard to the adviser role. As table 2 shows, the adviser of today will dramatically shift their focus from advising according to the business capabilities to advising according to the priority needs of the client.

They will shift their focus from managing client wants to uncovering client needs, from financial planning to client advising, from investment returns to achieving what’s important to the client, from doing everything themselves to leveraging specialists, strategic partners and working as a team and from being responsible for sourcing new clients to delivering value and converting and retaining clients.

The advice business that resists the current forces and only tinkers with change to the future adviser role will find it difficult to compete with those that will surely dominate our industry in 2012.

David Fox is the principal of Advice Centre Consulting.