Advisers fill their skills toolbox as they approach a changing industry
As the public moves to a position where it becomes more knowledgeable about the financial services industry and the products it sells, it is becoming clear that the rapport which the adviser builds with their client must be one based on trust and innovation.
This is obviously quite a task and may take a number of years to achieve, and without the right tools, this might be a lot harder to achieve. Equipping advisers with the right tools was the purpose of the Financial Planning Institute (FPI) Convention which was held at the Sandton Convention Centre last week.
Another highlight of the convention was the announcement of Peter Hewitt as the Financial Planner of the year for 2014. He takes over from Barry O’Mahony.
Introduce innovation to client interaction
If history has taught us anything it is that innovation is a key concept on which the world is based. The whole world thought that Christopher Columbus was certifiably insane when he claimed that the world was in fact round and not flat. They thought he was even more insane when he sailed out to prove it.
The Chairman of the social media network Mxit, Michael Jordaan, pointed out that if only the world embraced the same innovative thinking that Columbus did, the world would have been a far cry from what it is today.
“We need to be innovative when we engage with our clients in order to remain relevant. An adviser can go through all the conventional business steps when writing a policy, and they will be able to survive; but at what cost?” said Jordaan.
He added that ideas are not innovation; the implementation of these ideas is where innovation lies. But we as mankind are not good at taking ideas on board and turning them into innovation.
There are a number of ways in which this can be done. Jordaan points out that management needs to create companies that do not have immune systems and are able to adapt technology at a rapid rate. The second aspect is that no single human is smarter than a group of people. If faced with a problem, we need to pool intelligence. Thus, talking with other advisers when faced with a problem.
Risk profiling is in danger of becoming irrelevant
Retirement investing has become a hot topic in South Africa and will remain in the public spotlight until the Financial Services Board (FSB) finalises the Retail Distribution Review (RDR). This will be a significant point of departure for advisers as one of the objectives of RDR is to define advice.
One of the current departure points is risk profiling, but this is running the danger of becoming irrelevant in the current market. There are two schools of thought and Anton Swanepoel (CFP), who is a motivational speaker that specialises on topics within the financial advisory and intermediary services, says that risk profiling is crucial for a company.
“If advisers do not pay attention to risk profiling, the FSB will get involved and regulate this as well. This is happening internationally and is a concern for the industry,” said Swanepoel. He added that while risk profiling is important, it must be done in a responsible way. “Advisers must never let client’s emotions be the driver of making investment decisions. When it is a bull market, they will be aggressive and when it is a bear market, they will be negative. There is no stability in this and risk profiling finds the correct balance between passive and aggressive.”
But there is a school of thought that is completely against risk profiling. Andrew Bradley, CEO of Old Mutual Wealth, says that although risk profiling techniques have become more relevant, they are still ineffective in today’s society. “I have never met a client that praises risk profiling. Which of your clients shake your hand and says that risk profiling is responsible for the financial security they enjoy today? In fact, the majority of clients will blame risk profiling for the financial position that they find themselves in today,” says Bradley.
While Swanepoel agreed with some of the aspects that Bradley discussed, he pointed out that risk profiling is not the problem, the problem is how advisers deal with risk profiling. “How can we have a meaningful conversation with a client if we cannot quantify the risk? The customer needs to be at the centre of all the discussions,” said Swanepoel.
Raising the profile of the CFP brand
Many interactions within the financial services industry are increasingly being built on a certain level of trust that a client gives to their adviser. One of the most important talks at the convention focused on building the CFP brand, and incorporating it into your business.
“There are a lot of discussions about how much a client will pay for advice. There is also the misconception that clients won’t pay a lot of money for advice. But the public pays a lot of money for brand names because they associate a certain level of trust to those brand names,” said Helen Nicholson, CEO of The Networking Company.
She added that advisers need to set themselves apart from the industry clutter, and becoming a CFP is the way to do this. “But while the public will see a CFP as more professional, it is up to the CFP to prove that they are. Know your product and offer your clients the right products.
This hinges on the fact that a good adviser is able to build lasting relationships. This is done through networking which is one of the most underrated aspects of the financial adviser’s job. She pointed out that lasting relationships need to be built as a client’s risk profile and needs are constantly changing.
Editor’s Thoughts:
There was a lot of excitement at the FPI Convention and there was a sense that the information given at the convention was relevant and would help advisers become the professionals that the public expects them to be. If you were a delegate at the convention, what was your experience? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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