The ultimate financial planning model
The Financial Planning Summit covered the latest developments in the financial advisory landscape during the COVID-19 pandemic.
Leading local and international experts in their respective fields spoke at the event on the future of financial planning, the pros and cons of vertically integrated financial planning practices, how to set up your practice for continued growth and expansion, technology developments that are reshaping the industry, as well as many other relevant subjects.
Operating model in the 2020s
“As an operating model, we have competition from all corners. It’s not just between investment managers, it’s now from investment managers, financial planners and others. The consumer has also become more aggressive in terms of what they want,” said Sebastian Dovey, Entrepreneur, global strategist, and previously, co-founder of The Scorpio Partnership.
“The consequences of the 2000s are competition, convergence and culture. These are the three factors of the last two decades that have driven the changes of the 2020s. There has been a fundamental change in our thinking,” added Dovey.
“Now we have the convergence of analog and digital. Culture has become more prevalent in business models as well as how businesses are run,” he said.
“Historically, we used to think the best sign of success was our scale of assets. In the future, however, it will be the scale of data that we collect. Mass production is important, but so are tailored experiences. The 2020s are about the scale of data used and tailored experiences. We assumed clients would only choose us as service providers, but we were wrong. That’s why we have to show that we can optimize and match what they are looking for. We have to think of high retention benefits to keep customers with us. You have to think of augmented performance to engage with the client to become a better service provider,” continued Dovey.
Future clients, what motivates them?
“Another piece around the business model in wealth management as a trend is relevance… we have to remain relevant to all generations, and work with clients in the accumulation and decummulation phases. We also have to think of purpose. What are we actually trying to solve for our clients? It is beyond the financial aspect and also about the personal factor… why do people have this money and what is it they want to do with this money? These factors need to actualize into the product, service and experience. We also need to think of our value, performance and goals. What are we worth and how can we justify our worth? Combine performance and goals as a value proposition,” said Dovey.
Dovey emphasised that the customer of today wants you to be representative of responsibility and look after their money and journey. “We have plenty of clients to attract… they are all over. We just need to understand what drives their desires with their money, and how we can work with them from an accumulation and decummulation perspective. You need to change and adapt to meet customer demands.”
“The future is not about a single human endeavor, but combining team effort, different elements, looking at business models and looking at the entire customer journey, and bringing in skills like, for example, Chief Commercial Officers, to drive the business forward for growth,” concluded Dovey.
Understanding individualised HNW needs
Paul Mendes, Investec Corporate & Institutional Banking (CIB), spoke about the modern High-Net-Worth (HNW) investor and what we need to know.
“They are increasingly sophisticated, globally aware, proactive with their investments. The majority of South African HNW individuals are first generation wealth… their assets come from business ownership and proactive wealth generation activities. They are as active in building their wealth as they are in investing it. High tech high touch digital capability is key, ‘make it easy for me’ application processes, consolidated reporting, integration etc. Relationships are just as important as they ever were. It is all about trust and competence, making sense of varied and complex information/data to offer guidance and advice,” said Mendes.
“In the financial advisory space, they want exceptional service and expect something different… high level of personalization and flexibility, often multi advised with extensive networks, integration of all facets of their lives from investment needs, financial needs to life needs (life stages and estate planning). They don’t just want traditional investment solutions (e.g. numerous investment funds/unit trusts all chasing the same benchmark). Solutions must cover local and offshore solutions (need credible proven international partners). They want and require diversification (proper multi asset options across all asset classes – including shares & alternatives) that will generate relevant returns based on their specific needs and goals - Outcomes Based Investing (OBI),” continued Mendes.
“This new generation of HNW investors will require financial advisers to be more dynamic, sophisticated, and diverse,” added Mendes.
“In an HNW investment environment context, innovation requires an understanding of whether HNW clients need an invention, and how it can be delivered. It has to provide economic value and go beyond the ordinary status quo; it does not have to be new to the world, only to a market. Or, an industry innovation in the HNW investment environment can thus be thought of as the creation of a new need to the market, viable creating economic value for clients, financial advisers and the organisation itself or an investment offering beyond products to platforms, business models and client experience,” stated Mendes.
“Financial advisers need to move toward a more dynamic, needs-based client service approach, applying advanced segmentation and analysis to the traditional AUM model. The service model must be tailored to the individual needs of the HNW client. A client-centric service model will provide a better wealth management experience and strengthen the adviser/client relationship, with access to consolidated innovative viable financial, investment, financial and life products and capabilities,” he concluded.
Writer’s thoughts:
The Summit covered many subjects. When we look at the past few decades it is evident that competition, convergence and culture have become a big thing… they have, indeed, changed our thinking and the way of doing things. Data has emerged and it has become a gamechanger… you have to think of augmented performance to engage with the client to become a better service provider. Do you agree? If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za.
