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Advice gems from a product provider perspective

28 September 2021 Gareth Stokes

Open communication with clients, an ability to offer 24/7 advice and the smart combination of advice specialities, also called adviser teaming, stand out as critical factors to give financial advice practices an edge during times of crisis. These conclusions emerged during a panel discussion held on day two of the 2021 Financial Planning Summit, moderated by Kevin Hinton of The Collaborative Exchange. Hinton guided four advice and product provider stalwarts in a debate about the value of good financial advice in the pandemic context.

Fast, flexible advice during crisis

It can be tough finding financial advice ‘gems’ in a discussion dominated by product providers; but it turns out few are more in tune with the challenges facing financial advisers than the country’s large life and investment brands. “In any crisis, having access to an adviser is something clients need, and they need it fast,” said Ian van Schoor, CEO at Adviceworx. He also stressed the importance of proactive communication in addressing clients’ fears during periods of financial market adversity. “Organisations that are responsive, particularly in their client communications, play a crucial role in building client confidence,” he said. 

The panel acknowledged the tremendous strain that the pandemic had placed on advice professionals. Kerrin Land, Managing Director at Old Mutual Personal Finance, said that the Covid-19 mortality experience had caused significant emotional stresses for financial advisers. “As a planner, you usually have a nice mix of moments where you see a client achieving their financial goals versus a few occasions where a client parts and you guide the family through this painful time; over the past 18 months the emphasis has shifted to the latter,” she said. Gareth Friedlander, co-CEO at Discovery Life, said that an open-minded approach to client interactions had given financial planners an edge during this difficult time. 

Open-minded approach to client interactions

The ability to structure financial advice models, and to allow advisers to seamlessly adjust the balance between face-to-face advice and digitally-driven servicing, were singled out as key factors for advice practice profitability through crisis. The panel also observed that automation, or the application of technology in the advice process, was more important than ever due to the battle for margin shifting towards the distribution side of the value chain. “For advice practices to be successful, they are going to have to be able to manage a larger number of clients and a bigger book at a smaller margin,” said Land. 

The tug-of-war for margin reopened the ‘who own’s the client’ can of worms. “We can sit in our boardrooms and fight over whether the client belongs to the adviser or the provider; but at the end of the day the client belongs to themselves,” said Jeanette Marais, co-CEO at Momentum Metropolitan Holdings. “The client chooses the product, the provider and the advisor where they find trust”. In other words, trust in the advice or product provider brand can prove more valuable than product or price. 

Van Schoor warned against getting trapped in the minutia of the ownership debate. He pointed out that controlling the client experience and having a direct relationship with the client removed the risk of being disaggregated, wherever you sat in the value chain. He also commented that there was a trade-off between competing on price, where volume becomes your overarching objective, versus reinventing services and solutions across the value chain. “Clients will migrate to the brand that offers the most powerful client proposition; and that means whoever offers the best client proposition ends up ‘owning’ the client relationship,” said Van Schoor. 

Retaining much-needed advice skills

A concern that emerged during the discussion was the dearth of new advisers entering the market at one end of the scale, and the pressure on older tied advisers to exit the industry. “There are fewer young advisers coming into the industry, because they are worried about the difficulty in acquiring clients in the current environment; we could face a deficit of advisers across the country in coming years,” said Land. But there are plenty of skilled financial planners who are nearing provider-enforced retirement ages who could remain in the game. A solution might be to encourage succession and transition among this cohort. “We have 70-year old advisors that are at the top of their game, providing financial planning advice to clients with whom they enjoy fantastic relationships,” said Van Schoor. 

The current crop of financial advisers remain concerned about the viability of human-led advice in a world where the rate of tech adoption shows little sign of abating. “You cannot have a purely digital relationship,” said Land, before advocating for a blended advice solution. In which the easy things happen online and the complex advice conversations take place face-to-face. According to Marais, robo-advice has not eroded the human advice factor despite being on the scene for more than a decade. She said that connectedness between the adviser and client would always be delivered by hybrid models, where advisers and product providers performed functions that added value, leaving time-consuming administrative and compliance processes to robots. 

Influencing behaviours and lifestyle decisions

Friedlander closed with a comment on the value of advice under pandemic conditions. “The value of advice has never been more evident than it is today, and advisers should see this as an opportunity,” he said. “Advisers have done a remarkable job in ensuring that clients retain their covers, and product providers have come to market with a range of innovations to assist clients in staying protected at this important time”. Financial advisers play an important and influential role in society that goes beyond giving financial advice to influencing behaviours and offering input on important lifestyle decisions. 

“The financial services industry, and the advice industry in particular, must shift from managing money to managing the person, playing the role of life and financial coach,” said Marais, before ending with a quote that she attributed to David Kop, of the Financial Planning Institute of South Africa (FPI). “To devote time to the important role of behavioural coaching, the financial planner will need to employ technology to perform routine tasks; use their technical skills to blend the results from the technology with the financial plan; and [use] their human skills to help clients make the right decisions”. 

Writer’s thoughts:
The continued regulatory push towards wider access to financial advice could result in South Africa facing a severe shortages of qualified financial advice and financial planning professionals. One of our concerns is that the looming shortage might create artificial demand for robo-advice and other forms of advice automation. Is this a valid concern? What should local product providers do to create more opportunities for financial advisers to enter the market? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za

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