In life, everybody makes mistakes. No human is infallible. But life is not about getting hit, it is about taking the hit and still moving forward. That is called progress. Over the years, many advisers make mistakes when it comes to giving their clients advice. Some may have never lost clients over it while others may have been placed within the spotlight at the Financial Services Board (FSB).
Board (FSB).
Don’t be scared
Speaking at the recently held Masthead Masterclass, Daleen Harris – Senior Legal Adviser at Old Mutual – says that advisers should never be scared of making mistakes.
“Let us be honest; nobody likes to hear that they make mistakes. Yet, we all make them. Making a mistake when advising your client is not a major issue as long as ownership is taken and steps are put in place to rectify the mistake,” said Harris.
Suitable advice
Probably one of the places where a mistake is most likely to happen during the advice process is record keeping specifically when it comes to the record of advice (ROA). Unless advisers are methodical, at times to a level when it borders on being obsessive compulsive, information is likely to slip through the cracks. Harris’ advice is to take a look at that pile of paper on your desk and sort through it as a matter of urgency.
“Are we making sure that out our ROA’s are bullet proof? Are we tailoring our advice or are we cutting and pasting from a general template? Look at the issues that the FSB will likely raise with you should you be scrutinised by them and work on those issues,” said Harris.
This is a problem area which Harris calls: things that advisers need to disclose.
Apart from the fact that your ROA will be scrutinised with a fine tooth comb, you also need to provide evidence behind the rationale of the recommendations you have made and the products you sold.
One of the dangerous biases that advisers can fall into is the assumption bias. Just because we live in an age of technology where information is freely accessible, it does not mean that your client is educated on a specific product. “Even if they have read up about it on the internet, or have spoken to a friend about it at a braai, explain every fascist of the product to your client to avoid mistakes,” said Harris.
Things you are close to
Another area that could cause potential problems for advisers is things that they are close to, or not close to in this instance.
Harris encouraged the room full of advisers to take a step back and look at the profile of their clients. She then made a statement that made the attendees shake their head in realisation: your clients are not getting any younger.
“Research was recently conducted in the US which showed some shocking results. According to the research, as much as 70% of the assets under management in a typical adviser’s business will be lost at the death of a client if the adviser does not have a relationship with the client’s beneficiaries and family,” said Harris. Advisers need to be close to the youth or they will be putting out many fires.
A workable plan
She added that advisers need to take a step back and come up with a workable plan of how they will interact with the youth. This will no doubt be based on digital interactions because the life of a Millennial is defined by their technological relevance. However, we are still not at a point whereby financial advice given over social media is an acceptable form of advice in the eyes of the FSB.
So how do we counter this? It does not mean that social media needs to take a back seat. On the contrary, very little interaction with a Millennial will be successful without social media interaction.
By providing relevant content and fostering an appropriate connection and engagement with clients, brokers can build up a strong social media presence and following. This creates an opportunity for brokers to position themselves as thought leaders in their respective fields, enabling them to attract new clients.
Editor’s Thoughts:
Humble pie does not need to be an indigestible dessert, provided we learn from the mistakes we make in the backing process. Harris provided some insightful advice on how we interact with our clients and who our clients are. But are these practical steps enough to avoid making mistakes? We would like to hear your thoughts. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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