Why financial advisers no longer own their clients

Contrary to what some believe, the client owns the client: the client is not owned by the adviser, the dealer group or the broker, as Craig Parker explains. 

Clients are more empowered and more educated now than ever before. Gone are the days when a financial adviser – or anyone – could expect to be the only source of financial information and education for a client, control the conversation and somehow “own” the client.

The truth is that now more than ever, the client owns the client. 

The business world has long been focused on putting the client at the heart of what it does and has striven to deliver products and services that meet client’s need to create long-term relationships.  

The rise of the internet and social media has led to an increase in transparency for clients and providers alike, with the dual effect of making the industry more competitive and every provider in the distribution chain responsible for clearly explaining their value proposition.

VIEW ALL

View all

This is a very good thing for the client, as it increases their awareness and understanding of their options. And it also creates opportunities – and challenges – for advisers.  

The question of how financial and risk advisers should be looking at engaging with clients and creating trust and loyalty is becoming more pertinent than ever.

Combine this with the fact that waves of significant regulatory reform continue to drive consolidation in the industry and it’s clear that the advisers most likely to succeed are those who understand the changing landscape through a customer lense.

And even more importantly, those who understand that relationships based on trust are essential for long-term success. 

Distribution channels have changed 

One of the major reasons for the growth in empowerment of clients is the increase in the number and sophistication of the channels through which clients and advisers can interact. Clients watch television and hear advertisements for insurance products. 

They research financial products and strategies on the internet and read reviews about service providers written by consumers just like them. And, as has always been the case, they talk to friends about their experiences. 

With enhanced communication (powered by the web) and better education comes better understanding and knowledge, but also a lot more “noise”.

This means that advisers face a greater challenge than ever in breaking through the noise to build trust and loyalty. It is therefore crucial that advisers be able to clearly articulate what they are offering, their client value proposition, and for this to be truly understood by clients. 

The next step is to segment clients correctly and to engage with them in the way most suited to them. 

The fact that different clients engage via different channels means that assessing how best to use these channels is key.

This means developing specific strategies not just for website construction and design but also for each of the social media channels through which clients interact. 

The rise of social media means that advisers have more means than ever to connect with clients, which is a plus.

But it also means that client experiences, both good and bad, are amplified, thus increasing the transparency of products, services and customer experiences.  

However, it’s important to realise that added transparency and access to information can benefit everyone in the industry, even if the information is not specific to a particular practice or area of expertise.

A good example is the country risk adviser who noticed a huge pick-up in inquiries off the back of television advertisements for direct life insurance, and in particular funeral plans.

Even though the adviser did not deal in these types of insurances, the fact that potential clients thought about their insurance needs for the first time, and rang him to discuss them, meant that his business benefited.   

The lynchpin of success 

Given the recent wide raft of government reform, most notably the Future of Financial Advice (FOFA) legislation, it would be easy to believe that business focus has been dominated by having to manage ever-increasing regulation and compliance.

Combine this with the rise of the ability to connect with clients on line, and advisers could be forgiven for thinking that old-fashioned relationships are less important now than in the past.  

And just like the adviser who benefited from television advertising products he did not offer, it’s important to understand that the relationship with their client is not the only relationship which needs to be nurtured.

The client may be the central figure in the adviser’s world, but in order for the adviser to be at the centre of the client’s financial world, strong relationships with third parties are needed.  

A trusted adviser can come in many forms – the accountant, real estate agent, lawyer or mortgage broker. If these professions and their networks are approached about protection needs, who do they refer to?

Building solid partnerships with these professionals can be the key to setting you apart from competitors. 

Ultimately, the value of financial and risk advice lies in its ability to meet not only the needs of clients today but also into the future. This means that long-term relationships based on trust must be developed. 

If the client feels more empowered than ever, then the relationship between client and adviser must underpin every transaction more than ever.

And if an adviser can deliver solutions which meet a client’s needs, delivering value over and above what is expected, the adviser will have no need to ‘own’ the client, and should have nothing to fear from a changing competitive landscape and an empowered client. 

Increased consumer activism is shifting the balance of power so that now the client owns the client.  

Craig Parker is the general manager at Affinia Financial Advisers.