Are we prepared to refocus our outlook?

In the June edition, I focused on some of the effects that changing global regulation is having on the financial services industry. Those were not the only changes that have had an effect. Below are other important changes which cannot be ignored.

It is increasingly difficult for advisers to find clients who have high investable assets and no debt. In fact, there are a growing number of clients who have a high income and low assets who need planning advice.

Advisers believe that this is far more important than telling clients that they will need $3 million dollars to fund their retirement in 35 years. The fact is that a client who earns a professional income and is capable of saving $50 000 to $100 000 per annum, could be far more valuable in the long term than a client drawing down on a $ 2 million portfolio .

So instead of competing for the funds under management, which lies in the hands of the high net-worth client, advisers are targeting clients with higher incomes and little assets and are converting them to clients for life.

Using technology

The rapid advancement of technology has also started to change the way advice businesses work. To deliver fee based advice, advisers are adapting to new software and processes. In the age of Skype, advisers are realising that they can have client discussions without either the client or the adviser driving to a meeting. Video conferencing is flexible and more convenient for both client and adviser.

Client planning sessions are also being done on interactive software systems which allow the client to log on and look at their financial situation regularly.

Experiments are also being conducted by advisory businesses on offering clients a fee for any advice questions asked. Clients log into a web site and post their question and their $10 dollar fee. An adviser on duty will pick up the question and send the answer back to the client.

In the near future advisers will be developing a webutation as they turn to social media to help them find clients. If an adviser cannot be found on Google, Facebook or Twitter, they cannot be legitimate in the eyes of the modern client.

Changing the planning experience

The traditional planning approach consists of either charging a client for a financial plan or giving the client a plan for no charge, if they allow the adviser to place the investment. Data is captured into a software system and it churns out a report which is talked through with the client before the adviser moves on to the product. This is all associated with a transaction and is resisted by many clients.

By making the engagement process less stressful and handling it in a collaborative manner, advisers ensure the client has a valuable experience. The goal seems to be to create a comprehensive plan for their lives which does not focus on retiring in 40 years’ time. In fact, there is no retirement assumption at all. The client/adviser relationship is a partnership as the adviser is no longer placed in a more authoritarian position. Instead of making recommendations, they discuss options with the client and then implement the solutions in a beneficial way.

Looking into the future

Going forward, advisers will need to customise the way they deliver advice to the next generation of clients. These clients will be helped by future savvy advisers who will get to them long before they get to a point where they are attractive to the traditional wealth manager. This approach will eat up the future base of clients of the traditionalist and place their businesses under severe threat.

The message is clear: embrace the new changes or move on.