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Challenging conventional thinking

27 September 2018 Myra Knoesen

On 18 September financial advisers gathered at the Sandton Convention Centre for Alexander Forbes Investment’s 2018 IFA Symposium.

Designed to grow sustainable practices, financial advisers engaged with international headline speakers, economists and thought leaders around topics that challenged conventional thinking.

The financial adviser of the future

In the opening speech an important message was shared, “The financial planning industry is at tipping point. It is at a tipping point because South Africans need help. We are here to support financial advisers to challenge conventional thinking, to help advisers achieve better outcomes.”

“We are seeing a different demographic and things need to change. In South Africa one income could be for up to 25 people so the nature of advice needs to be at a much more socio-economic level. The challenge for the future will be less about planning for retirement and more about planning for life.”

“We need to look at things through a different lense. We need to change the message and the value add. South Africans need help and advisers need to know how they can add value. The financial adviser of the future needs to understand the debt of clients.”

“Financial advice is needed much more than ever. It is about developing a model that addresses the client base of the future. This entails a new mind-set around where advisers add the most value, a range of tools that allow us to deliver on this differentiated model, a better understanding of how we can be most effective in helping South Africans achieve their financial funding needs and financial well-being and a more appropriate business model that rewards the right behaviours from service providers.”

If we can get this challenge right, "it is a model that has the power to create meaningful change.”

The right conversations and behaviours

But how do you bring people into wealth creation when there is wide open access to credit bringing income down and up and down and up? This is a question that was posed by Anne Cabot-Alletzhauser, Head of Alexander Forbes Research Institute.

Cabot-Alletzhauser analysed the behavioural spending of South Africans and said we need to think differently and approach clients differently. “We need to be cognisant of financial behavior and the socio- economic environment. A new generation is going to grow up here in South Africa. Does your current model address that?” she said.

“The building blocks of financial decision-making are automatic thinking versus deliberate thinking, the role of the social context, mental models and relationships with and mindsets on money. Wealth is created by having the right conversations and changing the behaviours,” continued Alletzhauser.

“Financial planning after retirement is one of the most desperate needs. This is not about what investment or annuity to purchase. It’s about understanding that to solve these complex problems – we need to think holistically. This is about helping unearth family/community/in kind solutions. It’s about helping people face those conversations we never want to have – but can’t go on without,” she said.

“Family planning/cooperative planning isn’t just about the post retirement period. It’s potentially the most important wave of financial planning for the future. A cult of individualism will make it impossible for South Africans to achieve what they will need as a country. Families are where creating that cultural norm needs to begin. Building up social mobility and a stable middle class demands a culture of intergenerational wealth transfer. This will be the way South Africa will evolve the fastest,” continued Alletzhauser.

“Financial advisers aren’t helping people to get to the core of the behavioural transformation that will have the biggest impact on their financial lives. Financial advisers could become the most important catalysts for the kinds of changes this country will need for the future,” she said.

“Achieving this will demand a new mindset around where advice is most needed, new technology to enable scalability, new products to meet a new set of needs, a new business model to account for how this can be paid for, the mindset needs to move beyond wealth creation and more towards efficiency and controlling costs,” concluded Alletzhauser.

Multiply your multiple

Rob Macdonald, Adviser Consultant at Fundhouse then emphasised that if advisers look after their clients, the financial health of their business will be looked after.

Macdonald has worked closely with over 300 independent financial planning businesses to help them build value for their clients and their businesses.

“There are three steps to building value in business. The first is to ask yourself why you do what you do. If you want to think about the value you want to add to your business think of the ‘why’ first in the context of this evolving industry,” said Macdonald.

“The second step is to understand your business genetics at the moment. What type of business are you? Are you an individual practice or collective practice where your value is in your book of clients? Or are you a wealth manager where your clients see your business as their adviser rather than one individual?” asked Macdonald. Based on what you are today will help you plot your value relative to the five types of businesses that he suggests exist in the industry. But in an evolving industry you don’t need not be constrained by what you are today.

“The third step is on how to build value. Ask yourself what your value proposition is. What differentiates you from the crowd? Identify which clients you want to work with and how you will do it. Be specific on what service you are offering. What are your clients paying you for? Everything you need to do to build value falls into place once you have identified your value proposition,” continued Macdonald.

“You can then develop processes and systems that create efficiencies but also support a consistent brand. You can get the right people into your business and develop an effective culture. And to build value in the 21st century technology must be core to your business. Without this you run the risk of becoming obsolete,” he emphasised.

Editor’s Thoughts:
As stated above, if we can get this challenge right, it is a model that has the power to create meaningful change and if advisers look after their clients, the financial health of their business will be looked after. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].


Added by old timer, 27 Sep 2018
What the industry needs to be doing is trying to figure out where new advisers will come from in the future.
The present old guard is retiring and dying off and not being replaced by a new generation. Impending revisions to the commission structure will just make things even more difficult for any new comers to the industry.
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