A recurring theme of 2017 has been the need to demonstrate the value sound financial advice can add to a client’s life.
Numerous columnists and commentators have debated this issue in Money Marketing this year, and the conversation is likely to continue into 2018 as those approaching retirement grapple with the options facing them after pension freedoms.
Money Marketing spoke to four advisers about the moment in their career when they realised what financial planning was really all about.
The stories are hugely varied but have one common theme: adding value for the client and feeling valued for their work.
Peace of mind
For Red Circle Financial Planning director Darren Cooke, giving clients certainty about their financial situation as they faced redundancy was a key breakthrough moment.
Early in his career while working at Midland Bank in Derby, Cooke took on clients who were made redundant by Rolls-Royce.
He says: “I used to sit down with people who were saying, ‘I have been offered my service by Rolls-Royce, what does it mean?’.
“I would do a financial plan for them – it was all on the back of a piece of paper in those days because we didn’t have fancy cashflow planning spreadsheets.”
The experience showed Cooke how good financial planning can add value and give people peace of mind.
He says: “Even then you started to get that idea that what you were doing was making a difference to people because you were taking away that worry from them. The key factor was they came in saying, ‘I have got my terms, they look attractive but can I afford to retire?’ They would walk out of the room thinking, ‘yes I can’.”
Later, once Cooke had set up his own IFA firm, another client going through redundancy solidified the importance of cashflow planning to give people peace of mind.
The client was working in a top European role for a US pharmaceutical company when he lost his job and, as Cooke explains, the terms of redundancy were in line with US labour laws, but these were not on par with what might be offered in the UK.
Cooke had already completed a five-year financial plan for the client and his wife but suddenly, he says, “their world was in pieces”.
He says: “I had given them peace of mind that their five-year plan was going to do this and they would be able to finish work and have a comfortable life and suddenly that was gone.”
The plan was revisited and changed and the couple understood their initial retirement outlook was still a possibility.
Cooke says: “She actually phoned me later that day and said, ‘I’m going to sleep tonight. For the first time in three days I’m going to sleep tonight’.”
He adds: “People talk a lot about what our profession does but that kind of thing happens daily with good financial planners. We can stand outside the situation and that allows us to bring clarity.”
Cooke explains how those two experiences have informed his approach to financial planning: “The Rolls-Royce experience showed me the value of people having clarity over their money and the other showed me the value of showing people that in a picture, not just as numbers on a page.”
Farewell glazed eyes
Plan Money director Peter Chadborn says the moment he realised what financial planning was worth came from wanting clients to be more engaged in the financial planning process. The business no longer runs portfolios of funds for clients; a decision that came out of a desire to keep costs low and find out if clients are interested in being talked through portfolio reviews.
Chadborn says: “For the vast majority of clients, we were watching their eyes glaze over and they would just say, ‘do whatever you think’. We want the client to engage and we want to provide a service that is genuinely valuable.”
As a result, the business moved to focus more on cashflow planning and objective setting than reviewing funds. Chadborn says: “If we ditch that and move more to the planning side we can do so without changing our costs because we are reducing our overheads and our risks by not running portfolios of funds and we can spend time elsewhere.”
Because of the change to the business, Chadborn says client engagement has improved and referrals to the firm have picked up.
He says: “Clients who have been clients for a long time are much better engaged in the advice process and new clients buy into it quickly. We are comfortable with the fact that we offer an open and transparent service in terms of what it provides, what it delivers and what the costs are.”
‘Can you just sort it’
A key moment for Postcard Planning director Rohan Sivajoti came early in his career with one of his first ever clients. The client was in her mid-40s with two young children and she was recently widowed.
Sivajoti says: “Her life had just been thrown up in the air and she needed some help organising everything. She turned up at my house with a massive box of papers. She was so all over the place, she did not really know what was going on and just said, ‘here’s everything, can you just sort it’.”
Advisers can stand outside the situation and that allows us to bring clarity
When Sivajoti went back to the client, she described his help as being “cathartic”. He says: “I went back and said, these are the bits of paper you have to keep – which was three or four bits – and the rest have been scanned and are all safe and secure and you don’t have to deal with that paperwork anymore. When you can take away a bit of pain for someone who is going through something truly awful, it was such a good feeling to be able to help and come up with a plan for her, and for her kids.”
Addidi Wealth managing director Anna Sofat shares a story about one particular client that spurred her to move back into advice from a period spent working in management roles.
Sofat explains: “We had an enquiry from a client and it had been allocated to a more junior adviser than it should have been. We had a scenario where the client had had two meetings and there still was no clarity on what we needed to do for them and what they needed to pay us.”
Sofat put together a proposal but the client needed some convincing why they should pay the large fee.
She says: “I remember the conversation with the client about how we can justify the fee. I can remember being really clear as to what the client wanted and where we can add value. I knew we could provide value.
“It was the first time really – because it was a world full of commission – for me to turn around and say that this is the fee, it really doesn’t matter where it comes from but it is the fee you are going to pay for the [management] of your investments and I am going to deliver value and I know what I have got to do here.
“This was the first time I realised I could do things my own way. I haven’t looked back since.”
Despite that case taking place around 15 years ago, advisers are still having to explain to clients how advice can add value.
Sofat says: “There is more awareness of planning. Not from everybody, but there is more acceptance of help. There are still questions about professionalism but there is better knowledge around financial planning and the value of advice.”
Taking on big challenges with skill and courage
Financial planning has the power to enrich or even change people’s lives and is increasingly being recognised for its genuine value by policymakers and the public.
The introduction of pension freedoms has significantly increased its importance and the use of cashflow modelling tools – which have long been associated with the financial planning methodology – are fast becoming embedded as essential good practice.
Lifestyle financial planning has seen firms experience significant uplifts in turnover, increased profitability and sometimes more new referrals than they can cope with.
It isn’t a one-size-fits-all solution, however, and across the country we have many advisers and chartered financial planners also delivering technical, regulated advice where appropriate.
It takes practice, skill and courage to start the first meeting, often needing to deflect the talk away from products or solutions. Building client confidence and
trust is essential, with planners enjoying the experience of helping clients realise their goals and objectives by spending money at the right time.
In such instances, it is not unusual for the client to actively seek guidance on when to make the next big purchase or expenditure, having been educated on the relevance of sequencing risk and volatility drag.
The financial advice/planning landscape is changing at a dramatic pace and retirement planning is now as much about post-retirement as it is pre-retirement. Demographic change is forcing a greater focus on advice for later life and the millennials are demanding greater digital interaction as their financial needs become more sophisticated.
The biggest challenge for our profession is most prospects don’t get financial planning until they experience it personally.
Keith Richards is chief executive of the Personal Finance Society