Professional Financial Planning: It’s not about the money!

A professional financial adviser would probably define the outcome of a successful financial planning exercise as a process that provides clients with peace of mind, allowing them to achieve their financial goals. But, there are financial advisers who might regard a successful exercise as one that resulted in the sale of an investment product that pays a good commission. The obvious dilemma that this creates is – in who’s interests is the financial adviser acting? Given this, it is not surprising that the attribute that clients most seek in financial advisers, both locally and internationally, is somebody whom they can trust.

If that is what clients are looking for in a financial adviser, it is relevant to ask whether the training of financial advisers adequately prepares them to be trusted advisers. A leading international proponent of the concept of the “trusted Adviser” is Bill Bachrach, a highly regarded coach of financial professionals in the US. According to Bachrach, “the thrust of most training for financial professionals is how to influence people or, more plainly, how to get something from everyone you meet. My point is that the way you do business should, in every instance, reflect your sincere desire to put the client first.”

This is critical to developing a relationship of trust, which cannot take place in an adversarial way where a salesman sits on one side of the table, trying to peddle something to the client on the other. It is impossible to foster a relationship of trust in this environment. This can only happen if a consultative process is followed where both client and adviser see themselves as being on the same side of the table identifying and satisfying the client’s needs.

Although there are steps that can be learnt to facilitate the development of trust, it comes more naturally to some people than to others. These are the ones who make successful financial planners. They have either been blessed with or have acquired the skill to make people feel at ease, to listening and hearing their requirements and concerns, to establishing reliability and credibility and being completely client-focused.

What is interesting about this is that these are all people skills that have nothing to do with money.

Most clients seek out a financial planner when their circumstances demand that they seek advice. There are any number of circumstances that trigger this response; one of these is the reality of retirement. Most people only retire once in their lives. For the person in the street it is a subject about which much is written, but very little is understood.

People in this situation are often vulnerable. They are either scared stiff about making mistakes and ruining 40 years of hard work or they are suffering from information overload and are totally confused. Such a situation cries out for someone who can lead and reassure clients, that there is no need for worry because they have done this many times before. They need to be told that they will be taken through a process that will fully engage them, ensuring that their goals and objectives are properly and realistically identified.

The reasons most people are unsuccessful investors are because they often make cognitive errors in decision-making, or get caught up by the emotion of investment markets, or very simply they want to do what everyone else is doing, and succumb to social pressure. These three elements form the foundation for a field of study known as behavioural finance, which studies investor decision-making and behaviour.

If one of the financial planner’s roles is to offer clients a successful investment experience, a significant degree of coaching will be needed to counter the negative influences of these elements. Successful coaching, in these circumstances, will require an understanding of the psychological and emotional profile of the client and establishing a strong relationship based on trust. The nature of coaching is that it requires “tough love” from time to time. This is not a role a salesman is equipped or required to perform. But it is a critical role for a professional financial adviser.

Unfortunately, when it comes to the training of financial advisers, they are largely left to figure out how to do the coaching themselves. Perhaps one of the reasons why this void exists is because the financial planning industry seems confused about the role of the financial planner. Are they salespeople or are they simply advisers? Given the way the industry has evolved, the majority of financial advisers in South Africa have inevitably developed as salespeople, because that is how the reward system in the industry has been set up.

Most financial planners are conditioned and trained to act as if financial planning is only about money. Even for those advisers who may have some doubts in their own minds about whether this is right or not, the alternative advice route is so embryonic that the path of least resistance has been to continue on the route they know best. Little wonder then that the image of financial advisers is so tainted and that clients first and foremost want somebody that they can trust.

Bill Bachrach has a rally cry, which is: “Don’t be a salesperson, be a trusted adviser”. For financial planners in South Africa, this is a real challenge, as very little training or education is provided about how to build relationships of trust with their clients. In order to do this successfully, advisers need people skills, rather than money skills.

There is no questioning the amount of money skills training that is available to financial advisers. It is time for the industry to start investing real time and effort in properly equipping financial planners with the people skills that will ultimately determine their success or failure.

By Robert Macdonald (pictured right above), Head: Xchange Solutions