The university of life
How to enable positive customer outcomes and build a sustainable practice.
Financial planners should be regarded in the same professional light as doctors and accountants. This is according to the Financial Planning Institute of South Africa’s 2016 Financial Planner of the Year Award winner, Bruce Fleming. Fleming was speaking to a room full of financial advisers at the Old Mutual Advice For Life Series, Old Mutual’s engagement sessions for professional financial advisers currently taking place in various urban centres during August.
“If a doctor makes a mistake while a patient is on the operating table, the patient may die,” says Fleming. “If we as financial advisers make a mistake by not helping our customers adequately prepare for retirement, they may risk outliving their money. This is a serious mistake that will have a disastrous effect on the remainder of customers’ lives.” Although this responsibility can be daunting, he believes it is also an incredible opportunity to make a meaningful impact in the lives of South Africans.
So, how does South Africa’s top financial planner ensure that the right advice gets to the right customer?
“My approach centres on the ethos of lifestyle financial planning,” says Fleming. He explains that the philosophy influences everything from the processes within the financial advisory practice, to the way he engages with different customers. “It’s a holistic approach which ensures that customers’ finances are dealt with in relation to other aspects of their lives and not in isolation.”
Speaking at the same Old Mutual event, Lizl Budhram, Head of Advice at Old Mutual Personal Finance, explained that lifestyle financial planning is a future-fit model that ties in perfectly with the Retail Distribution Review (RDR) proposals, ensuring that advisers who adopt this approach will be sustainable into the future.
“The post-RDR world involves a fee-based structure, which means there are no commissions on financial products,” she says. She believes that the traditional commission approach has contributed to a distrust of financial advisers as customers believe that advisers are influenced more by commission structures than the needs of the consumer.
Budhram encourages financial advisory practices to avoid segmenting customers by age group or the amount of funds under management. “This is a short-sighted approach that only perpetuates the notion that financial advice is for the wealthy and older generation,” she says. According to the 2017 Old Mutual Savings & Investment Monitor, 62% of South Africans say that they do not have a financial adviser because they feel they do not have enough money to warrant it. “Every customer should be regarded as unique – and working with each one to understand them is at the heart of holistic, lifestyle financial planning,” she says.
“Lifestyle planning is about finding out, and articulating, a customer’s lifestyle goals and needs,” adds Fleming. He uses the example of “accumulators”, people starting out in their careers, or in mid-career, who are in the accumulation stage of building wealth. “For an accumulator, these goals may be to travel overseas once a year, to buy a house or to be able to maintain a standard of living when in retirement. These are tangible, real-life objectives.”
According to Fleming, the next step is to match the investment process to the lifestyle objectives or, in other words, ascertain what returns are needed to achieve those goals. “Only after that is established do we start with the actual investment conversation or assess what level of risk customers have to achieve those goals, and whether they can stomach it,” says Fleming.
Structuring the advice process in this way enables you to demonstrate real value by creating scenarios that are easy to understand. “If they aren’t prepared to take that amount of risk, then it’s back to the drawing board and asking, for example, if they would then be prepared to go on a holiday every two years instead of every year, or retiring at aged 65 instead of age 60.’”
When asked about financial planning for millennials, Fleming highlights the need for relevant financial education in the initial stages of the advice process. “This is where the support of a trusted service provider is critical,” he explains. “Old Mutual, for example, has extensive financial education tools and resources that assist customers to begin asking the relevant questions.”
Budhram believes that providing young investors with relatable financial information will enable them to ask their advisers the right questions. “The 2017 Old Mutual Savings & Investment Monitor highlighted that 82% of Generation Z respondents said they are always trying to become more knowledgeable about financial matters,” says Budhram. “A key focus for us is to ensure that our advisers are equipped to provide this support to customers.”
Fleming emphasises the importance of walking the journey with customers. “Being able to offer advice that fits into, and evolves with, the life of a customer is what will set future-fit advisers apart from the rest,” he says. “It’s about building a long term relationship. Customers who approach you in their 20s should remain customers for the next 40 to 50 years.”
