Your advice is supposed to be personal

[ October 9, 2015 ]

Statements of advice (SOA) can be harsh and sterile documents. Computer written and compliance motivated they can be terribly impersonal, and this could be costing you dearly. RG 175.136 says “An SOA is a document that helps a retail client understand, and decide whether to rely on, personal advice.” So an SOA should be personal. An SOA should set out a vision for what is possible, and how your client’s financial life can improve and financial pitfalls can be avoided. Your SOA should motivate your client. Your SOA should make your client see you as their long term financial adviser, someone in whom they can confide, express hopes and goals, even dreams, and as someone to whom they can confess mistakes, concerns and even fears. I reviewed a new adviser’s first SOA yesterday, and it literally commenced with “WARNING: ….”.  Ignoring the atrociously incorrect use of the upper case, font size and bold type, it was an offensive start to an SOA. Put yourself in the client’s shoes: how would you react to advice prefaced by “WARNING:…”? Would you not be concerned? It does not inspire confidence. I would be on the back foot from the start, wondering what this was all about, and why I had to be warned before I even knew what the advice was. What are the prospects of this SOA being accepted as good advice by the client? Skip the belligerent up-front warnings. Instead say something that shows you are a real financial adviser. Say something that is going to make your client feel better. Say something that make it more likely your client will change their behaviour for their better and decide to rely on your personal advice to them. Say something that will differentiate you and make it more likely that your client will see you as their trusted adviser, confidant and mentor on financial matters. Show your client you are on their team. Try something like:

It was a pleasure to meet you both. You are ahead of the pack financially, and the sacrifices you put into getting your home deposit together and getting your super snowball running bigger, faster and earlier are now paying off. My advice aims to build on this and make a good thing even better, and help you achieve your goal of being financially self-sufficient by age 45.

Of course, obviously, the praise must be genuine and not disingenuous. Often your clients will be behind the pack financially. Here praise may be inappropriate; but positivity won’t be. It never is. For your less successful clients try something like:

It’s fair to say your financial position is not what you would have hoped it to be at age 45. But the good news is by taking some common sense steps now with your home budget, your coming salary negotiations, some sound tax planning and some extra super your financial future becomes much brighter. A comfortable retirement plus something for the kids is achievable provided you act now.  This SOA sets out what you should do now to achieve these goals.

Everyone likes a psychological pat on the back, and/or some words of encouragement. Your SOA is the perfect place to do this.

The Dover Group