9 core competencies for client success

[ November 14, 2012 ]

There are nine core competencies that advisers must master if they are to be trusted implicitly by clients.

FOFA is drawing closer. Strategies to create a fee-for-service practice are essential. Step one is to first provide the services. And to provide the services you must first establish yourself as your clients’ primary adviser, ie the primary service provider.

Your competition is strong and varied: it includes banks, solicitors, accountants and, of course, other financial planners. Unless you control the advice process, that is, unless you are your clients’ primary adviser, the advice role will be taken from you, and you will lose your client.

To control the advice process you have to control two things. You have to control your client’s advice decision and you have to control your client’s relationship with the other advisers, ie the banks, solicitors and accountants.

To control your client’s advice decision you have to present as competent in at least nine core disciplines. These core competencies are:

  1. risk insurances
  2. superannuation
  3. tax planning strategies
  4. business advice
  5. finance and debt management
  6. property
  7. tax compliance services
  8. shares and other direct investments, and
  9. estate planning

You need a working knowledge of each competency, or a relationship with a trusted associate. You do not need to be an expert yourself. Most client presentations are simple, and basic advice on each of these competencies will be within your skill set, or able to be contracted in.

Part of being a good financial planner is knowing your limits and when to contract in complementary or additional skills. A good medical GP knows when to call in a specialist. And for the GP-specialist relationship to work the specialist must respect the primacy of the GP-patient relationship, adopt a support role, and not subsequently compete for the patient’s custom.

Exactly the same principles apply to your referrals.

I can recall an acquaintance, let’s call him Joe, gleefully telling me he about his 10% referral fee from a local accountant. Money for jam, he thought. I counseled caution, and a protective contract. He pushed on regardless. Two years later glee turned to grief as the accountant employed an in-house financial planner to take over the financial planning process. Joe lost half his practice.

Joe’s mistake was to cede primacy to the accountant. He let a crocodile into his pool.

The message is simple: you have to be the primary adviser in the nine core competencies. You must be the go to person, the guy your client trusts the most. You have to present as being across all relevant issues, all nine core competencies. If you do not have the competency you have to control the referral process, ie control the other service provider.

Joe should have insisted on a “no-advice” role for the accountant. The accountant’s function should have been restricted to accounts and tax returns, with no advice, and no other contact with the client. If the accountant advised on, say, a tax matter, that advice should have been channeled through Joe as the client interface.

The accountant should have been prevented from advising on “overlap” areas of advice, such as SMSFs, business advice and debt management.

The same principle applies to each of the other core competencies. For example, if you refer your client to a buyer’s advocate you should remain responsible for the general advice, including cash flow estimates, finance, tax planning and long term strategy. You should limit the advocate’s role to the specific purchase transaction, and nothing else. You should handle the post-purchase functions, such as instructing a conveyancer, arranging finance, selecting the purchase entity, arranging tax depreciation reports and liaising with a rental manager.

In short, you should provide the overall client service and only contract out specific tasks, and nothing more.

Remember, step 1 in creating a fee for service practice is to first provide the service. You have to provide the service to get the fee.

The Dover Group