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The changing nature of financial advice and how to best adapt your practice

11 January 2022 Debra Slabber, CFA, Portfolio Specialist at Morningstar Investment Management SA
Debra Slabber, CFA, Portfolio Specialist at Morningstar Investment Management SA

Debra Slabber, CFA, Portfolio Specialist at Morningstar Investment Management SA

The past 18 months has radically changed the way advisers connect, communicate and acquire clients. It has accelerated conversations around the integration of technology, succession planning, strategic partnerships and long-term opportunities and challenges for independent advisers.

Advisers constantly need to keep their finger on the pulse, stay informed, on-trend and in the know of what could impact their clients and their client’s investments. Client demand for convenience, transparency, and objectivity is also increasing. Regulation, technology, product construct and the availability thereof are changing rapidly.

What challenges are independent advisors currently facing and how should they stay informed and filter out the noise with a continuous wealth of information coming at them from all angles. Clients are becoming more knowledgeable and they are demanding more convenience more transparency and more objectivity.

At the 2021 Morningstar Investment Conference I discussed these issues with two leading advisers - Robert Adshade, Founder of Alchemy Financial Solutions and Quinton Ralph, Managing Director, Founder & Private Wealth Manager of Resolute Wealth Management.

As the saying goes – the only constant is change. So, what are some of the basics advisers can focus on to best adapt their practice?

Embrace the positive changes the past 18-months have introduced

Had society not been forced to interact with each other online (via platforms such as Zoom and Teams) would we have even considered it to be an option? Would clients have been open to trying it at all? Who knows, but luckily, we were forced to find out. The Covid-19 pandemic forced everyone to adapt and to do so very fast.

Let’s take a moment to consider some of the positive changes that have become commonplace in the aftermath of the pandemic:

- Clients were forced to have to try online meetings – and some now even prefer it. Had it not been for lockdown requiring clients to interact with their advisers via Zoom, they might not have been as willing to try it.
- Online check-in’s and meetings are requiring less time on the road, leading to more efficient use of our time.
- Meetings and check-ins are shorter and can even happen more frequently.
- Face to face interaction is appreciated anew, selective and a valuable relationship builder.
- We’ve been able to educate and liaise with clients regularly – via newsletters, webinars and one-on-one online meetings.
- Technology such as DocuSign has enabled us to save the planet one online switch form at a time and has saved our clients a lot of time and effort.
- We’ve been able to gain access to and give our clients access to external experts and speakers, that we wouldn’t usually have access to (due to cost, logistics, etc.).

Face-to-face interaction can never be replaced

If lockdown restrictions showed us anything, it is the need, value and power of personal, face-to-face interaction. What we all missed the most, was the ability to see our friends, family, colleagues, and to interact with each other.

The topic of Robo-advice has made its rounds for many years now, with many speculating that it might just reach a point of replacing in-person financial advice. If the past 18-months has shown us anything it is that this will not be the case.

Unquestionably, the most important role a financial adviser has is understanding the unique needs of the end-investor, offering creative and tailored solutions, emotional and behavioural guidance and a solid, long-term relationship. As much as financial advice is focused on the numbers, it is even more so focused on the emotional and behavioural advice element. There is a huge value attached to the trust relationship advisers have with their clients. You would be very hard-pressed to find a robot that can truly accomplish these fundamentals.

Both the advisers agreed that, although Robo-advice has its place and could very well add value, it would never replace the role of an independent adviser.

No man is an island

Therapists often have a dedicated therapist of their own that they see on a regular basis. Not only to help them deal with their own hardships but also to help them deal with the hardships of their clients that may affect them too. In addition, when they need help, a different perspective and/or advice on how to best help their client, their therapist acts as a sounding board. Therapists recognise that the quality of their mental health and guidance is of paramount importance to assist their clients as best possible. There is a lot that financial advisers can learn from this practice.
Although the industry is competitive by nature, one shouldn’t forget the value of having a network of like-minded advisers that you can tap into for advice and guidance.

Whether this is a group of your colleagues, team members and/or external industry peers, this group can be used to share new ways of working, brainstorm creative solutions to unique client problems, give support to other advisers as well as receive advice on thorny issues. The goal is to enhance each other and in so doing, act in the best interest of end-investors.

You can’t pour from an empty cup

Financial advisers are human too. You read the same newspaper headlines as your clients and must also focus on remaining calm when the world is in a flat spin. As the saying goes – you can’t pour from an empty cup. Make sure you take the time to live a well-balanced lifestyle, don’t neglect your own financial and emotional wellbeing and speak to colleagues or other like-minded advisers when you are struggling to cope with current events. Learn to receive support the same way in which you are often required to give support.

Decide what type of business you want

Whether you would prefer to have a small number of large clients, or a large number of small clients, decide which you would prefer and adapt your practice to be able to cater to this. In the same manner, you need to decide if you want to manage assets and/or wealth. Do you want to keep managing the investment process and products in-house, or would you prefer to free up your time to focus on clients? The most important choice to make here is making a decision and sticking to it.

Although both advisers I spoke to managed their practices in completely different ways, both highlighted the value of partnering with a Discretionary Fund Manager. For example –

- All clients are given consistent advice across the board.
- It has allowed for risk mitigation, accountability as well as improved research capabilities
- It has enabled lower fees for clients, better pricing and enhanced performance.
- It has enabled both advisers to grow their practice by taking on more clients, and bigger clients.
- It allowed for a unified investment approach and house-view.
- It has enabled succession and reduced key-man risk, in that the business has the needed process in place to continue should one key individual no longer be with the business.

In closing

We all went through radical change but technology can be used to our advantage and won’t dehumanize the industry. There’s a great need for a community of advisers – especially with fewer in-person and networking opportunities. Now more than ever, independent financial advisers need a safe space in which to share ideas and knowledge. Older advisers have a responsibility to pass their knowledge to the younger generation of advisers – after all, they will be looking after your clients when you are no longer able to.

Find a recipe that works for you – whether that’s having a small group of large clients or having a large group of small clients. Whether you work with DFM or continue managing the assets yourself – strive for a good work-life balance and always act in the best interest of clients. Start planning now how your business will continue to serve your clients when you are no longer involved and start putting steps in place from a very early stage. This will make the succession process easier for both you and your clients.

Most of all - never take for granted the power and value of good financial advice.

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