How can the financial advice sector manage its post-Hayne transition from an industry based on selling product and maximising wealth to a profession devoted to long-term wealth management and helping people live the lives they want? The answer is in your clients’ heads.
Individual advice firms currently face a complete rethink of their skills, systems, processes and value propositions. Of course, individual products and investment solutions remain important in this new world, but they are an outcome to the process, not a starting point.
The good news is that the drivers of these changes are not simply the regulatory environment, but actual client need. In fact, it can be argued that our industry’s previous structures, built around selling product, neglected what the market really required.
Think about what leads most clients to hire an adviser. Inevitably, these are people experiencing a transition in their own lives – the sale of a business, planning for retirement, caring for ageing parents, creating a legacy, to name just a few.
The traditional approach in these cases was to tackle these individual life issues firstly in terms of product or technical responses – wills, trusts, income splitting, insurance, business succession, risk assessments, asset allocation etc. The problem here is that the technical discussion circumvents the possibility of a more open and deeper conversation that gets to what the client truly cares about. The relationship risks atrophying at a transactional level where what the adviser is selling is technical expertise.
It’s like going to a concert by a classical guitarist, who spends half the evening talking to the audience about the gauge of his strings, his hand positions, or his approach to vibrato and harmonics. These are all important inputs to his art, of course, but what matters to the audience is the music and the emotional effect it has on them.
Where advisers really add value
My view is that advisers’ technical know-how should be accepted as read. Where they really add value, at least in the client’s eyes, is in values discovery, mentoring, coaching, counselling, project management and as a catalyst for meaningful change.
The goal is to use the conversation with clients to stimulate a deeper conversation inside their own heads so that they can easily connect the solutions you offer to the part of their brains that relates to what is most important to them – not necessarily money or wealth, but family and relationships and hope and meaning.
At this point, many advisers look at me skeptically and say: “That’s all very well, David, but I’m a CFP, not a shrink. My job is to talk to people about money and investments. If they need that sort of touch-feely collunselling, I’m the exact wrong person.”
Actually, you’re exactly the right person. The fact is money and wealth issues are frequently connected to something deeper and identity-based. Unless, you can link the left-brain functional issues to the right-brain emotional ones, you’re unlikely to be able to help the client at more than a superficial level.
It’s like that story about the trainee shoe salesman. He became expert in all the inventory, knew about various kinds of leather and where the shoes were made, was patient in helping customers find the right fit and had them walk around the store. “But I’m still not selling anything,” he complained. “People always walk out saying they’ll think about it.”
The store manager responded by telling the trainee: “What do you think people are buying when they come into our store? At a superficial level, they’re buying shoes. But what they’re really looking for is to feel good and more confident about themselves. That’s your job.”
Similarly, an adviser who announces his/her value proposition as a 12-step process for picking stocks is likely to find a lot of prospective clients saying: ‘I’ll think about it.’ But when they can convince the client that they and their family are going to be OK at a time of fundamental change in their lives, that’s valuable.
Advice in transition
What happens during life changes like a new career or a shift toward retirement is that a lot of financial and money issues, long dormant in our consciousness, drift to the top. The confusion people feel about these issues are often an analogue for something deeper, given that they are in transition from one phase of life to another and feel uncertain about everything.
There’s a great study on this process of how people manage transitions by the late Dr William Bridges, an American historian and literature graduate who advanced the idea that transition is largely an internal process for the individual. The role of the adviser, or other counsellor, is to help them get through this process productively.
“We resist transition not because we can’t accept the change, but because we can’t accept letting go of that piece of ourselves that we have to give up when and because the situation has changed,” Bridges wrote in one of his most popular books.
This is what advisers mean when they sense that their real job is hand-holding. The client feels like they are on a heaving ocean, gingerly stepping from one rocking boat to another. The transition is emotionally and practically difficult, but they feel better if they know someone is there to help them cross safely.
So, the idea of transition is critically important. Ironically, it is coming at a time when our own industry is undergoing something similar. Old certainties and ways of doing things are disappearing. We sense there is a better way, but many are reluctant to take the leap.
The technology and compliance and certification challenges for advice firms are real enough. But my sense is that the ones who succeed most will be those who best grasp and apply the philosophy of transition, not only in their businesses but in their clients’ lives.