Perception is everything

According to Liberty’s research the barriers to getting a financial adviser are that 22% of clients believe that advisers are too expensive, while 19% believe they will not add value to their lives. FAnews spoke to Jac de Wet, Wealth Manager at PSG Wealth, Jason Bernic, CFP® and Financial Planning Coach at Old Mutual Wealth and Richard Rattue, Managing Director at Compli-Serve SA about this perception, how we can change it and whether digital marketing could be the answer to gaining trust.

Affordability is a hindrance

“One of the unintended consequences of RDR-type legislation, in other jurisdictions, has been the overall reduction of the adviser population as the costs of rendering financial advisory services escalate. So, advisers have to charge commensurate fees. By way of example, an adviser may charge anything upwards of R1000 per hour to render advice and meet operational costs, and for many clients, despite realising the benefits of financial advice, affordability is a hindrance. These statistics point to the so called ‘wealth gap’ and if 22% of clients feel that advice is too expensive, it is probably because they have experienced that to be the case,” continued Rattue.

“There are two factors that need to be considered, namely price and value. The perception that financial advice is too expensive for the value added by the financial adviser can be changed by financial advisers clearly communicating their value proposition and service level agreement with the client. Clients should understand that skilled and qualified financial advisers are professionals who take pride in the service and value they offer. Clients understanding that professional services require professional fees, and advisers and clients communicating with each other regularly are essential,” said de Wet.

Price versus value

“It is important that both parties communicate clearly and speak the same language in terms of value. Many clients and advisers unfortunately speak the language of price. The relationship between price and value is cost. The final cost of an item is the value of the item, less the price. This point is easier to grasp when it comes to physical goods. When a customer wanting to buy a car gets a quote from Audi, for example, the car salesman rarely hears, “That is madness I can buy myself a bicycle for way less than that price!” Customers comprehend the value of an Audi and do not make unfair comparisons to unrelated products or car makes. This comparison becomes more difficult for intangible products or services where assessing ‘quality’ is more difficult,” emphasised de Wet.

“In our industry, if a client pays for advice and then earns a return on investment and receives tax savings that exceed this, there is unlikely to be a problem closing the deal or retaining the client. In some years, returns can be negative while advice fees still need to be paid – leading clients to question the quality of advice. The focus, however, needs to be on the long term value the adviser adds – and conversely, the long term costs of ‘do-it-yourself’ decisions. Advisers can aid this process by positioning the value of a service or product, communicating their value regularly and clearly, and educating clients about their role,” continued de Wet. 

A perception of value

“Expensive is a perception of value. Value is created through a number of factors including experience, expertise, trust and delivery,” said Bernic.

“Experience is everything. It’s what creates dopamine, puts a silly smile on the client’s face and butterflies in your client’s tummy. It’s what leaves the client with a feeling of satisfaction and money well-spent. It’s also what gets your client back, doing more business and referring friends, colleagues and family,” continued Bernic.

“The adviser needs to have the necessary know-how. One cannot expect to provide a specialised service – especially one that influences the financial outcomes of a client’s life – without having the skill. Experience in the industry is one thing, but it is becoming more and more important to get qualified. As our industry moves to professionalising itself, clients are also being educated and looking for quality advice. As with other professions, they are more aware of a provider’s credentials or lack thereof,” emphasised Bernic.

“Relationships are established and built on trust. Trust is often earned over time, but it can be established, to a degree, at the outset. Mark Keating from Sales Guru says that you can know someone for 20 years and not trust him, but you could also meet someone and have an immediate feeling of trust, depending on how that person shows up. He also says that nowadays you just need to dress properly and show up on time to establish trust! Ultimately, clients make buying decisions on the back of trust, especially the higher value ones. If they trust you, the will commit to you,” stated Bernic.

“Lastly, do what you say you’re going to do. Create certainty with a client, because that builds trust. Never let a client down or leave them hanging, not knowing. Keep in communication, even more so during times such as this, when the market has failed to deliver for a number of years, and we have run out of stories,” said Bernic.

The antidote to this problem

“The growth of robo-advice is directly proportional to the advisory or wealth gap, and this is an exciting, although daunting, time of change. While individuals may believe they must see an adviser, economic factors make it impossible for advisers to see clients for a minimal fee, but robo-advice presents an opportunity,” continued Rattue.

“What we might end up seeing from a good financial practice, positioned to handle this shift and making the most of what it may bring, is essentially a tiering of clients. There may be gold, silver and bronze tiers perhaps, according to net worth or portfolios of clients. The gold client will see the adviser at least annually, or perhaps up to three or four times a year, while the lower tiers may access services through robo-advice facilities, perhaps only meeting with the adviser if more detailed advice is needed,” said Rattue.

“It is really an opportunity to streamline time and costs. Importantly, adding technology-enabled services does not equate to replacing advisory jobs, but instead can assist advisers to do their jobs even better and more efficiently,” continued Rattue.

Engaging digitally

“Digital marketing can be used as a very effective tool for financial advisers to communicate their value and to gain the trust of clients and prospective clients. The reach and immediacy digital offers can be a real asset if used correctly. An untapped market of young people can be entered and exploited by making use of digital platforms,” concluded de Wet.

Bernic concluded by saying, “Digital and social media will create presence and is useful when a client researches an adviser. I believe that a digital presence will assist a potential client to make a decision to meet/interview a new adviser, and then, there will be a second decision required to proceed with the adviser. On this note, social media is a must. It’s a non-negotiable across the Millennial and gen-x generations. If the internet is used to get a comprehensive background check on a music artist in under five minutes, then it’s a good guess that clients are Googling the person that is going to manage their money for the next 40 years. However, trust is gained through one-on-one interaction. Social media may support a decision to meet ‘in person’ (it could be via a video call), but it is only through personal exchange that a relationship is established and deepened.”

Editor’s Thoughts:
Perception is everything! People make decisions about people based on what they see and don’t see. As mentioned above, advisers can aid this process by positioning the value of a service or product, communicating their value regularly and clearly, and educating clients about their role… its about experience, expertise, trust and delivery. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za