I have always said that the number one challenge for advisers in a fee-only world is creating a service worth paying for. The trouble is, I never had any hard data to prove it.
Well, over the last few weeks, my database has shown up an interesting trend.
I am a big fan of surveys, so before anyone can opt in for my free online content, I insist they answer a few questions. One of these is:
Out of the following, what is your biggest challenge right now?
- Getting more of the right clients
- Pitching bigger, more worthwhile fees
- Holding engaging client meetings
- Too many unprofitable clients
- Demonstrating value
- None of these
Three years ago, the biggest challenge facing participants was getting more of the right clients. Pitching bigger, more worthwhile fees came in second place, with too many unprofitable clients in third. Demonstrating value was fourth, pretty much equal with holding engaging client meetings.
However, this last 12 months has seen quite a shift. Way out in front as the biggest challenge now facing advisers is demonstrating value.
Could this be a result of increased transparency? Mifid II? Flat or declining markets? Increased consumer awareness? Are adviser fees starting to stick out like a sore thumb? My guess is that it is a combination of all of these. I am also guessing it is going to get worse over the next two years. A lot worse.
Demonstrating value in year one with a product or investment-focused service is fairly easy. But the big question is, how are you going to keep delivering value as fees become more and more transparent?
It seems to me that many advisers around the UK now have plenty “more valuable” clients. They are getting their bigger fees. But more and more are now realising they have to think really hard about how to keep these fees.
There is a tendency for advisers to suffer unnecessarily because they fall into what I call the value transference trap.
It is easily done. As most advisers now operate a percentage of assets under management fee model – and because most have an investment-focused service proposition – clients assume they are getting paid for managing their money.
The “value” gets transferred to the money and the adviser is measured by the performance of that money. When this happens, the adviser comes under increasing pressure – both price pressure and performance pressure.
Even when some great financial planning work has been carried out, many still find themselves heading for the trap – primarily because of their method of payment and the constant investment focus. This means review meetings become just that: tiresome reviews of the performance of investments when they should be more engaging forward planning meetings.
To avoid this, advisers need to develop a service proposition that is high value and delivers great client benefits year after year; one that is totally focused on clients’ lives, not their money. Where it is clear to clients that you get paid your ongoing fees for the life-changing experience that comes with proper financial planning delivered in an inspiring and engaging way on an ongoing basis.
And more importantly, we need to keep the focus there – on proper financial planning – re-engaging clients constantly with what matters most.
What matters most is not the performance of their money, or lowest possible charges, but helping them have the clarity and peace of mind of knowing where they are heading financially. Helping them get and keep the life they want. This is the value in proper financial planning.
To do this, we have to bring a sense of urgency to the financial planning process.
Bob Veres, esteemed US financial planning commentator and one of the keynote speakers at this year’s BACK2Y conference, says in his book, The New Profession:
“Most people – including your clients – have no idea what they want out of their one precious life. They’re sleepwalking through their existence, with nobody to wake them up and tell them that every minute is important. Granted, people come to you thinking they want investment help. But what they really want is a better life, and permission to live a better life from somebody willing to tell them what they need to do to get and keep that life.”
This is our job. We have to remind people that life is not a rehearsal.
So, if you want to demonstrate value, never forget: this is where your value is. It is not in financial products or investments. These are just tools that you use, from time to time to get the job done. Do not let the focus become the tools; keep it on where it belongs – on your client’s life.
Paul Armson is creator of the Inspiring Advisers Lifestyle Financial Planning Online Coaching Programme and co-founder of Life Centered Planners