If you were to imagine your practice 10 years from now, what would it look like? How would your clients’ needs have changed? What role would you play in their lives? Would you still have a role?
It seems evident that our industry is at an inflection point. Traditional approaches to financial advice are likely to diminish and a new kind of adviser will emerge.
I believe this new kind of adviser will be what I call the ‘Life-First Adviser’ – someone who takes an approach that goes beyond financial planning and money management to the life issues that drive financial decisions. It’s a term that not only describes what such advisers do for clients but also a way for these advisers to differentiate themselves in the market.
The life-first approach recognises that client needs change as they move from wealth accumulation to wealth conversion, wealth protection and, ultimately, wealth transference. Client planning requirements are evolving away from ‘single-need’ solutions such as investment management or tax planning and towards integrated solutions that demand a truly holistic approach.
Yes, there are already advisers out there called ‘holistic’, but I don’t believe many are truly holistic. For some, holistic advice means a purely financial approach, defined in terms of looking at the client’s overall financial picture. Others take a life planning approach and focus on the psychological or emotional aspects of money.
But these two approaches used in isolation from each other are not holistic and, on their own, present problems. A focus on emotions can be much appreciated by the client, but they may find it hard to articulate what the adviser truly does for them. The purely financial approach can fail to differentiate the adviser’s value proposition from that of other advisers; clients assume you will look at all aspects of their financial situation in any case, and most advisers would claim that they do.
The life-first approach combines both of these to provide truly holistic advice.
Staying ahead of the curve
A restaurant I know has thrived for 35 years under the same family management. Hundreds of other restaurants have come and gone in that time, but this dining spot continues to attract customers through good times and bad.
Asked why he has been so successful, the owner told me: “Simple – we’ve probably undergone two-dozen style changes since we’ve been open. It’s not so much that the food is good, but the fact that we’ve been able to anticipate the changing tastes of our clientele before everyone else. The restaurant industry is full of examples of good restaurants that have fallen out of favour simply because their owners rested on their laurels.”
This example is seldom followed in the financial advice business, where firms typically stick with what’s worked in the past.
But when you consider the pace of change in most professions and industries today, it would be short-sighted to think the global financial advice industry would be immune. We are already seeing the impact of robo-advisers, Google and direct low-cost providers on the way clients seek advice and what they will pay for.
Traditionally, investment and financial planning focused on positioning the client for the future. Clients looked to retirement as the incentive to save for tomorrow. That future has arrived, and today’s client has different needs than a decade ago.
A maturing consumer is moving from the accumulation stage to more immediate concerns, such as:
- Will I have enough?
- What kind of life can I lead now that I’m retiring?
- How do I plan for the day-to-day life issues I’ll face as I get older?
The fact is, client needs change as demographics, technology and the wider economy evolve. To satisfy those needs and stay ahead of your competitors, you need to be flexible and responsive, while continually examining the value you bring to clients, prospects, target markets and centres-of-influence.
The Japanese business philosophy kaizen holds that successful businesses maintain their success by making small, daily improvements in what they do. They never take their success for granted by just sitting with their formula. In fact, change is both expected and incorporated into planning. Instead of saying ‘if it ain’t broke, don’t fix it’, consider what might break in the future.
In pondering change, many advice firms presume it’s just a question of updating the positioning or the delivery of advice. This makeover approach is akin to rearranging the deck chairs on the Titanic.
The reality is that the service clients want to buy has changed. In short, the success of your practice (or business) in the future will depend on the moves you make today to stay ahead of the curve.
Why life-first advice suits changing times
If the future that your advice was directing people to has arrived, how do you re-position yourself?
Life-First Advisers help clients transition to the next phase of life. Using a ‘life-based’ instead of a ‘money-based’ approach, the adviser talks to clients about their needs, concerns, opportunities and goals before moving to financial solutions.
Because the nature of the discussion focuses more on the life and emotional issues clients face, the adviser moves from being purely a financial counsellor to a mentor, a coach, educator and catalyst for change.
In other words, you become the primary adviser in clients’ lives, one who understands their key concerns and the financial resources available to serve them.
This involves a transition away from transaction-based compensation to a fee-based approach, to ensure the services the adviser provides are in total alignment with the client’s needs and interests. Clients then understand that they are paying the adviser for a coaching and planning role, rather than for their ability to pick stocks or forecast markets.
Finally, and in contrast to many of their counterparts, Life-First Advisers take a strategic or ‘passive’ approach to portfolio asset allocation. They manage their clients’ nest eggs based on where clients are in their lives, rather than on what the market is doing at any given time.
Let’s build tomorrow’s advice business today – start by moving from ‘product to people’, and, from ‘money to meaning’.
This is an excerpt from a book to be launched shortly titled The Life-First Adviser: How the new financial coach connects money with meaning, by David Haintz and Barry LaValley.