Not taking credit where credit is due

In an earlier example we spoke of an adviser who suggested his client contact her bank and request a more competitive interest rate. She did, and was able to reduce the interest rate payable from 5.2% to 4.8%. On her loan of $500,000, this equated to an after-tax saving of $2,000 per year. If she was paying tax at a marginal rate of 30%, this meant she had to earn an extra $3,333 each year just to pay the interest.

The challenge then for the adviser became to ensure that the customer realised exactly what had been achieved by the adviser’s suggestion. It all happened so easily and with such little fuss that there was a chance that the client did not fully comprehend how much money had been saved, and how their decision to use this particular adviser had already paid off in spades.

Our suggestion then became for the adviser to include a ‘the story so far’ section when preparing any future advice. This section would include a running tally of the saved interest and would be updated in each and every further advice. Something along the lines of:

I am pleased to note that you are still paying the most competitive interest rate possible on your home loan. As it has now been three years since you approached the bank about reducing the rate, we calculate that you have saved over $5,500 in unnecessary interest payments on this loan. If the amount saved is dedicated to accelerating the repayments of the loan, we estimate that you will reduce the time taken to repay the loan by between one and two years. 

 There is a bit of a trick here. The adviser’s aim is to blow his own trumpet without sounding arrogant or self-satisfied. The best way to do this is to use simple mathematics and let the numbers do the trumpet-blowing. Simply work out the amount by which the client is better off and set it down in the advice. This is not arrogant: it is a fact. And the adviser is well within his rights to make sure that the client is reminded, politely, of this fact.

The Dover Group