Why we love change

[ December 10, 2015 ]

The financial planning profession is awash with change. The robots are coming. So is LIF, and its halved first year commissions. Educational standards are rising, accountants’ exemptions are disappearing, tax advice is morphing and default funds are multiplying.

Change is normal. It’s healthy. It’s something to be welcomed.

Change makes it easier to be of value to your clients.

When things change older players lose ground. Younger players leap ahead. They don’t have the sunken costs and emotional commitment to what went before.

Some speak of “agility”. It’s the latest boring buzz-word. I prefer “ability”. Ability needs no buzz. Ability is more important than agility.

2016 is a great time to be starting a new financial planning practice. The legislative and regulative changes mean the potential for rapid growth and value is better than ever.

What should you be doing as 2016 dawns? What can you do to make yourself a better professional? What can you do to help your clients prosper and get more out of their lives? What can you do to be of more value to your clients?

Love the one you’re with

Your client is the person sitting in front of you, not the model on the PDS cover. No one is that perfect. In fact, your client is very imperfect and this means you have to compromise. The perfect pitch won’t work with a real client. You have to do better than that. You have to put yourself in your real client’s shoes and come up with a strategy that is truly in their best interests, and appropriate to them.

It takes more than a switch here and a switch there. It needs substance. It needs reality. It needs skill and understanding. It needs empathy and sympathy. It needs body language, intuition, presence and prescience. It needs experience and expertise. It has to take in the full range of a client’s interests and life cycle. It has to look over the horizon and it has to motivate. It needs time and trouble. You have to want to help. Really help.

Take risk insurances, as an example.

Your client does not have the infinite resources and hope needed for a fully insured result. Your client cannot afford it. She wants to take her kids away at Christmas, and she cannot spend her dollar twice. Recognise this and accommodate it. Strive for common ground. Compromise. Reduce the sum insured. Lengthen the waiting period. Tax-deduct the premium. Rebate some commission. Place the insurance in super. Take your fee from there too. Step the premium and agree the sum insured.

Make it affordable. Whatever it takes to get her insured.

Explain yourself. Record the compromise in your SOA. Under-insurance is real and it’s not the end of the world. It’s much better than no insurance. Your SOA is a record of your advice to your client. So record your advice to your client in clear concise and effective language, at least one paragraph, that she is under-insured and she knows it, understands it and accepts it.

Remember, if it’s not affordable for her it’s not appropriate to her.

(Love to see an institutionalized robot do all that!)

Create a homogenous client base

Think about who your ideal clients are. Where do they live? Where do they work? Where do they play?

Be there. Present to them. E-mail them. Advertise to them.

A homogenous client base is an efficient and profitable client base.

A homogenous client base lends itself to standardisation and systemisation. You can create a strategy faster and more efficiently, charge less and make more profit. What takes someone else two days takes you two hours. You have done it before and you are not reinventing another wheel.

Create a set of say twenty template SOAs showcasing your strategies.

Pick one out, insert your client’s details. Then spend a few hours making a good thing even better by carefully personalising and extending the original template.

Make your SOA sing.

Include links to third party materials to increase the information content.

Get a colleague to run an eye over your draft. Are you missing something? Is there another good idea out there that will work for your client? Find it and get it into your SOA.

Create a strategy checklist. Ask “does this work here?” Does this fit my client? Is there something else I can add to my SOA in that will create more value for my client? How can I make my advice even more in my client’s best interests and even more appropriate to my client?

How can I be better?

Talk to your clients every week

Or at least communicate with them.

Talk is not cheap. Talk takes time and time is money. But e-mails are cheap. It takes the same amount of time to e-mail one person as it does one hundred. Or one thousand. So use your e-mail. Often, or at least once a week.

Read a great article? Say, a salient summary of how simple super is? Create a hyper-text link, pen a short summary and send it to your clients and your potential clients. (You have a potential client list, don’t you? It’s an e-mail list of persons who might become clients. If you don’t your competitors will.)

No client will complain.

Some clients will read it, and heed it.

All clients will appreciate the thought.

A few clients will ring and come in for a meeting.

Do this once a week. Make it a professional discipline to identify and disseminate at least one relevant piece of writing to each client. It’s the simplest and easiest way to keep in touch with and in front of your clients.

Create a great website

Clients like websites. Spend some time looking around. See what the best financial planning websites are like. Pinch the best ideas and make them better.

Content is king. Make sure the casual reader picks up your philosophy and attitude on first contact. The home page should tell your story and what you can do to create value for your client.

You do not have to create all the content yourself, you can just link it in, take your clients to good sources of information and share it with them.

A good example is Trish Power’s www.superguide.com.au website. It’s the best SMSF website around. And it has a free client newsletter: Subscribe here. Linkwww.superguide.com.au and others like it in other areas of financial planning and encourage your clients to subscribe to it.

There is no point reinventing wheels. Your clients don’t expect you to, and will appreciate your professionalism in sharing value creating resources. The more information you can provide your clients the more they will use your services.

Clients want strategies, not products

Challenge yourself to formally recommend at least three strategies to each client every year.

Invite your client in to discuss things. Make it an agenda free meeting, and make it a free meeting. Never let a fee note get in the way of a good client meeting. Ask your client questions. How is work? How is business? How are the kids? How are mum and dad? How is the home? How is your tax? How is your super? Are you worried about retiring? Are you worried about not retiring? Where do you see yourself in ten year’s time? What can I do to help?

Find out what your client is concerned about. Listen carefully to what they have to say. Don’t launch into sales pitch number 7. Think and reflect, and strive to come up with an idea or suggestion that fits in with what they want to do a makes a good thing better.

Has your client overlooked something? Let them know if there is a gap in their plan.

Has your client not aimed high enough? Let them know of what others are doing, and what they can do.

Has your client aimed too high? May be break it down into steps. One at a time. First things first.

Discuss things that work. Most clients spend too much. Suggest a cash budget. Many clients pay too much tax. Talk about tax, and what can be done to reduce it.

Super should feature. What about the home? Paying for the extension? Can the interest rate be negotiated down? Can the principal repayments be deferred?

Is your client female? About half will be. Discuss gender equity, the need for it to be assertive and insist on their rights at every turn. Gender economic equity requires attitude.. This includes financial rights. Super and home ownership are critical here.

What about estate planning? Fresh wills? Fresh POAs? Fresh BDBNs?

What about buying a business? What about buying into an employer’s business? What about starting a business? What about expanding a business?

What about asking for a salary increase? What about changing jobs?

What about re-training or up-training? Training to improve future salary and/or avoid future redundancy.

What about negative gearing?

What about positive gearing?

What about a SMSF?

What about gearing a SMSF?

What about extra super now to pay off a home loan faster later?

What about an early inheritance?

At least one or two of these questions will get traction. Create set plays that work for most of your (homogenous) client base. Give them examples and case studies exemplifying what can be done. Paint a positive picture. Encourage and compliment them.

Work out how you are going to be paid

You cannot help your clients if you are not making a profit. Your practice must be profitable. A profitable practice presupposes appropriate pricing.

The answer is not found in a rah-rah seminar, where you walk over hot coals and tell yourself ten times while you clean your teeth “I am worth it, I am worth it” to find it all fizzles once you are back at your desk.

The average full time worker earns about $1,500 a week. Most earn less. So quoting $400 an hour is not going to work with most clients. You have to be smarter than that. The key to effective pricing is first demonstrating value. “Value” not mean some remote esoteric subjective good feeling that may be one day the client will be happier than they are now. “Value” means money in your client’s pocket.

You must show your client they will be demonstrably better off, now and in the future, in measurable monetary terms. Money saved or money gained.

Demonstrate your value before you demand your price.

Pricing is a perennial problem and there is no perfect approach. What works for one client may not work for another. What works for one adviser may not work for another. Beware the gurus: you cannot coach if you have not played and I seriously question how many times they have sat down with a real client with a real budget and negotiated a price for financial planning advice.

One thought: if you are in growth mode concentrate on your long-term revenue and your long term client relationships. Get the client on board. Make sure she is happy. Whatever it takes. Then show the client how good you are and how much value you can create for them. Increase your fees slowly later, bit by bit, making sure your client has the capacity and the willingness to play.

If your practice is more mature, and there are no more hours in your day, think about using price as a filter. The clients who do not value your services will self-select, and leave. You will be left with a happier and more appreciative group of clients, which makes your life happier too.

Or think about stratifying your clients and charging higher prices to the higher strata who get the higher level of service. By the way, some clients will not need the higher level of service, and will be better placed on the lower, cheaper, strata.

I confess to being impressed by facilities that allow advisers to take your fee from the client’s investment, including their super. This will be in many client’s best interests, as it will leave their day-to-day cash flow available for their day-to-day needs. This is a nice overlay between what is in the client’s best interests and what is in your best interests. They are not mutually exclusive concepts.

Preach institutional agnosticism

The institutions are your servant, not your master.

The institutions’ role is to provide your clients with services that you cannot provide. The best example is insurance. You need a service provider here. Survey their offerings and select the service that best suits your client, without fear or favour.

A tip. Service-wise they are more fungible than you think. There is not much in it. They are all OK. Therefore price should almost always dominate your decision: which service has the best after tax cost to benefit ratio. This goes for risk insurances as well as investment services.

Do not be beholden to any one institution. Play the field. Whatever is best for your client. You owe your client a duty of care. You do not owe any institution a duty of care. Think about index funds. Think about industry funds. Think about the smaller less known funds. Think about doing things differently.

One brand cannot always be the best. Or always be best for your client.

Think about ways of integrating yourself into the service equation and don’t slavishly refer your client to an institution. If you can do the work you should.

Direct investment strategies are great for advisers, and for clients.

The price paid to the institution reduces the price your client can pay you. The institution is competing with you for your client’s attention.

It’s your client, not their client. You have a best interests duty. They do not. Don’t abandon your client to an institution. Stay vigilant and watchful, and switch if it’s in your client’s best interests.

Search for that sweetest spot.


Widen your service offering

Can you provide more than one service to your client? If so, do so. You will end up with twice the practice.

The day of the mono-product financial planning practice is going.

The dedicated risk insurance adviser is almost a thing of the past. First year commissions drop by 50% over two years from 1 July 2016 and there is nothing you can do about that. But you can widen your range of client services to compensate for the imminent drop in income. Don’t be a dodo. Do so now.

Think about how you can do this. The Dover Way tells you how to do this: you can read how in Part 10 here: Creating a fee for service financial planning practice. The key is achieving the nine core competencies, either on your own or more probably through referral arrangements with trusted alliances who understand and respect their terms of engagement.


If you only have a hammer every client looks like a nail.

If you have nine hammers the position is completely different. The possibilities multiply. You will see your client in a better light, through multiple prisms. Your advice will be better for it, and your client will be better off for it.

If you can offer multiple client services your practice will grow faster. It will be safer, more stable, more profitable and more valuable.

Your advice will be more in your client’s best interests and more appropriate to your client. It will be more in your best interests too.

The concepts are not mutually exclusive.

The Dover Group