Transforming client interactions into memorable experiences

The financial services industry love to use words like "prospecting”, "upselling” or "cross selling” behind the walls of their corporate enclaves.

There is most of the time no hesitation to move in on "prospects” we hardly know, to do single needs selling without even looking at assets, liabilities, income and expenditure. Financial product solutions are still offered without knowing the client, and sometimes even without establishing the risk profile, goals and objectives of the client.

If financial services providers (FSPs) aim to remain relevant, they will have to put the client first, demonstrating an ability to see the world from the client’s perspective. This is also known as the skill of attunement, a skill rarely used in the financial services industry. There can be a number of reasons why FSPs are not applying this skill.

One reason is that the financial advice industry is attuned to financial products, rather than the consumer.

Say there is an embargo on the sales of all financial products for a month. My guess is that no consumer will get any financial advice during that month. Companies will likely ask their advisers not to give financial advice during the period because the advice will earn no income. Ironically, without income the companies will not be able to pay their advisers and overheads.

The possibility that a sales embargo would happen is highly unlikely, but it stresses the problem of earning an income only from the products FSPs sell.

The majority of FSPs earn remuneration by way of commission only after the implementation of a product. An FSP can use the globally-recognised six-step process of financial planning, but if the product is not implemented, the FSP does not earn a single cent of income.

Currently advice from an FSP seems to have no monetary value. The only reason why FSPs provide financial advice is because legislation requires them to do so.

Research shows that it takes on average 16 hours to meet with a client, go through the financial planning process and implement a solution. If this is the case, one can rightfully ask: how much time is spent on the gathering of information, the analysis and the drafting of solutions, and how much on the implementation of the product?

Most often more than 80 percent of time and effort goes into the analysis and development of strategies with suitable solutions. This effort and time is wasted if not remunerated, which will be the case in most cases where a product is not implemented.

However, there is an opportunity for FSPs to change the situation around, which would incentivise excellent advisory service, and in turn also benefit the consumer.

Current remuneration models let the product supplier dictate what the client is paying for, within the realms of legislation.

On the one hand, legislation enforces and regulates advice given by FSPs, while on the other hand advisers almost solely get remunerated for the products they sell, not for the advice they give.

Lawyers, accountants and other professionals are paid for their advice. One could argue that the financial advice professionals should as well.

FSPs must educate their clients that the financial advice on offer is valuable and not for free. FSPs need to move away from just selling products to also selling advice.

At the same time, FSPs should take the extra steps necessary to transform interactions with clients into memorable experiences where clients feel that their advisers are attuned to their needs.