The human touch: Not to be underestimated…

Some consumers are opting to buy their financial services products directly from providers, grossly perhaps underestimating the value of the human touch… It is up to financial advisors to play to their own unique strengths to combat the threat of direct s

An increasingly popular alternative for consumers is to represent themselves by buying their financial services products, whether life assurance or asset-based insurance, directly from providers, presumably to save money by dispensing with the crucial advice, administration and other services offered by intermediaries.

While the jury seems to be out on whether the direct approach is economically beneficial over the longer term, apparent technical shortcomings inherent in some products that are sold directly were highlighted in recent surveys, which also underlined the propensity of some direct operators not to pay claims.

Advisors needed more than ever

The reality is that all consumers, except perhaps those with a simple, single financial need like cellphone cover, would benefit from proper financial planning and advice. Growing product and legislative complexity implies the need for more advice and proper market analysis, not less!

In particular, consumers with multi-faceted personal financial needs require the expertise and guidance a professional financial advisor can offer in the areas of life assurance, short-term insurance, banking, investment, tax, trusts and estate planning.

Educating the public

These consumers are fortunate that South Africa boasts a formidable corps of highly competent financial advisors.

But financial services in South Africa has long been characterised by different distribution options. There will no doubt continue to be room in the market for various models, leaving consumers to make their own choices.

It is up to advisors to ensure that consumers are aware of the value they can add, in the face of an direct onslaught from direct insurers. In this competitive environment, what should financial advisors do to ensure that their share of the distribution pie is not eroded?

Protecting your slice

The answer to defending and growing their business lies in how intermediaries add value in selecting the best product for each individual’s needs, and in the broader process of professional personal financial planning. In short, financial advisors need to play to their strengths in combating the threat of direct sales.

Licenced to provide sound advice

The Financial Advisory and Intermediary Services Act (FAIS) requires financial services product providers to check that advisors are duly authorised, by product category, when they submit applications for new business. This ensures that the advisors are properly qualified to represent the client’s interests and that consumers are getting sound advice.

Advisors should proudly display and disclose this endorsement from the highest authority in the financial services industry to reassure consumers that their interests are well-represented, and that they are indeed receiving sound advice.

Qualified and experienced

While there has been much debate about the need for intermediaries to pass their exams, the resulting qualification is a major asset that confirms the advisor’s knowledge and ability to properly take care of a client’s financial needs. Also indicative of a broker’s level of skill and expertise is the length of time in practice.

Qualifications and experience equip advisors with comprehensive knowledge of an increasingly complex financial services market with an ever-wider range of products. Each of these products is touted as the answer, which opens the way for independent advisors to demonstrate their worth by being able to analyse the options before objectively recommending the most appropriate solution for each client.

Intermediaries who score highly in terms of qualifications and experience should promote these strengths in their efforts to secure more business. Those who are lacking in these areas should apply their minds in order to improve their competitive advantage.

Enabled to produce time and cost savings

Knowledge and skills aside, individuals generally also don’t have the time or resources to research, analyse and compare before making informed decisions.

Skilled advisors will provide this research, analysis and comparison as a matter of course, and will do so in a way that will save clients time and money, while enabling them clients to make not only an informed decision, but also the best decision for their personal needs and circumstances. Advisors should ensure that their presentations to clients reflect all of these value adds.

Geared towards long-term relationships

While advisors tied to particular product providers have less scope to play the independence card in their efforts to win business, all successful intermediaries understand the value of relationships and people skills.

The ability to establish and build long-term business relationships with clients is unique to financial advisors and should be seen as central to sustaining an advisory practice. Don’t underestimate the value of the human touch…

Positioned for success

Retaining existing clients is a top priority, given the cost involved in securing new clients. That said, the growing financial advisory practice will be looking to build new relationships, and this regard, advisors might consider fine tuning their general business skills.

In terms of marketing, sales and communication, have you considered a regular client newsletter to inform while keeping your practice top of mind? Do new social media and networks present any opportunities to communicate? What about the more conventional methods intended to generate sales leads?

Where operations are concerned, advisors should ensure they’re deploying the latest technology to improve efficiency and standards of professional service. Computer systems, broadband connectivity, and data gathering and financial needs analysis technologies are some of the factors to consider when looking to leverage operational advantages from modern technology.

It is up to each financial advisor to play to their own unique strengths to combat the threat of direct sales.