While the explosion of information has led to more savvy clients, the role of the adviser is still crucial. Kate Kachor finds that education is about information, presentation and a trust relationship.
It is easy to search through industry directories to find financial planners. However, the trick is to find a financial planner who can not only create a solid financial plan, but also easily explain how it works.
For many clients approaching financial planners is not an issue. It is more an issue of not being able to obtain the relevant and focussed information from the planner.
While clients can read a variety of publications to find the information they need to feel comfortable with a financial planner there is a limit to the amount of education a person can give themselves without external assistance.
It is therefore the job of the financial planner to provide assistance to help improve their client’s education.
Collins House Financial Services, managing director Dominic Alafaci believes planners must become more aware that when spending time with clients they are not only providing financial advice but also building a relationship.
Alafaci, a certified financial planner (CFP) and qualified accountant, who has been practicing for nearly 20 years says developing a relationship with a client helps in the education process which is a vital where the planner is concerned.
“Financial planners are like funnels. We listen, we observe and take in as much information as possible, we then use this information to make things easier for the client to understand,” he says.
Alafaci works along side three company advisers, who, each day devise financial plans for their clients. The group has 200 clients, with $200 million under management but says explaining even the simplest things to clients is important.
“What I usually say to clients, particularly new clients is make sure they allocate a hour and a half. I’d also say leave your cheque book at home and bring an open mind and a blank piece of paper,” he says.
Alafaci says before the initial meeting a copy of an advisory service guide should be given to the client. He says the guide answers the simplest questions the client might have.
“What we seem to do is talk through the clients objectives – we either help a client to develop their objectives or help them to clarify the objectives,” he says.
Alafaci says the client should also walk away with a one page summary. The summary enables both client and planner to decide which financial plan should be needed.
“We have at least one review, possibly two reviews with the client annually. At those meetings we refresh the understandings with the objectives and financial planning needs,” he says.
Another to take the stance that educating the client is an important part of the planning process is Macquarie Strategic Financial Planning associate director, Kevin Johnston.
The newly established arm of the private bank, which has only been operational since September last year, has entered into the financial services industry at a time when it is fully equipped with a great deal of information and self education for clients, Johnston says.
“There still needs to be more experience and wisdom to put the wide range of information and clients together. And in terms of that, Macquarie is educating its clients through seminars,” he says.
Johnston says company websites are also providing clients with interactive information about how to plan and what to expect.
“Our website has lots of information in regards to client education. We have quite a pro-active approach to this subject which leads to a direct business channel where company products can be offered online,” he says.
Macquarie’s income linked securities manager Craig Ellis says at present Macquarie’s web site, IncomeInvest.com.au, offers access to debentures and a select group of managed funds which include products from BT, Macquarie and County Direct.
According to Ellis the bank is also in talks with its financial planning division about providing online advice and information.
“We are looking to create relationships with financial advisers as well as provide research advice that their clients might need,” Ellis says.
Ellis says there is nothing worse than a client not understanding what a planner is talking about and says with the help of the planners, the site will provide clients with enough information for them to educate themselves in the office or at home.
“Clients can learn the basics and become more investment savvy in their own time, and it improves their level of understanding. We want to make it as unthreatening as possible so clients can invest like a professional,” Ellis says.
On the technical side, Macquarie’s associate director equities lending, Rob Morton says client education in the margin lending sector is not as easy as slapping a web site together.
“Importance of client education is a hard one in this case because margin lending is not an intuitive concept, its something that’s got to be learnt,” Morton says.
“Unlike a credit card or mortgage, margin lending is a difficult concept to get your head around. It means leading clients into a learning curve, and out of an existing comfort zone.”
He says on the face of it almost all of the margin loans on offer are similar and there are some differences on headline price but the industry appears to be a split between people who use margin lending for purchasing managed funds or equities.
Morton also says there have been changes in the market with wraps and master trusts being more frequently visited by clients who use them as investments.
“There is also an increasing demand for instalment gearing arrangements, where people borrow, save and invest money which comes out of a bank account.
He says at the end of the day, the aim is to offer clients as much information as possible, even though clients seem reluctant to move towards geared investments.
The bank recommends that if clients are not sure about what investment avenue suits them, they should seek external professional advice.
“Clients need to be comfortable with the basics. If they are interested in enhancing their wealth of information, they should be able to get their head around it from the outset,” he says.
“The last thing you want is for someone to go and do something and be in any way unsure about aspects of what they’ve done.”
Tips for better client education: for the client
Allocate an hour and a half when first seeing a planner
Set objectives before seeing the planner if possible, otherwise work out objectives with a planner.
Read widely about different investment opportunities and vehicles.
Visit company websites to see what products are available and are on the market
Contact the Financial Planning Association for planner locations.
Tips for better client education: the planner/financial professional
Talk over client objectives, either defining them or clarifying them.
Provide educational tools on company websites.
Keep a strong communication link between your client.
Ask clients what their needs are, what a planner could do better.
Provide information to your client in plain English without industry jargon.
