From one-stop shop to family CFO

The future of advice for me is about transitioning from the traditional multi-service model to sitting on the family board and coordinating the complex financial affairs of fewer, but higher-net-worth clients; enabling advisers to deepen relationships while reinventing themselves for success. 

With around a quarter of Australians having received financial advice in the past but about 40% intending to seek it in the future, opportunities exist for forward-thinking advisers wanting to grow sustainable businesses in the post-Royal Commission era. However, clients now tend to know more – and expect more – meaning many advisers will need to transform the way they position their services and the value they bring. 

To do this, advisers will need to offer more than financial expertise alone in satisfying clients’ expectations – and it will be those advisers who can connect with clients’ hearts as well as their minds that will be best placed to prosper. Academic qualifications and technical skills may no longer be enough on their own – advisers need to demonstrate value in the context of clients’ lives and legacies, not just in terms of investments or insurance, and that requires a new set of psychological and emotional skills. 

With product-related commission remuneration structures largely obsolete as a business model, many advisers may feel they are at a crossroads: whether to continue offering a wide range of one-stop shop financial services to dozens or possibly hundreds of low-fee-paying clients, or reinvent themselves as true fee-based professionals able to nurture deeper relationships with a smaller but higher value client base.

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A NEW LEVEL OF FINANCIAL ADVICE

We encourage advisers to embrace this change by shifting from traditional ‘one-stop shop financial advice’ driven by products towards a clients’ life vision approach; thereby learning to professionally service the needs of high-net-worth individuals, families and business owners. 

Advisers can articulate their value proposition for successful families and business owners so that the client adopts a new way of thinking about advice services. Client-centricity is also how advisers can attract the ideal fee-paying client and build a valuable, sustainable business they continue to enjoy working in.

A SEAT ON THE FAMILY BOARD

High-net-worth clients typically have clear perceptions of value around financial advice. They also respond well to the notion that their adviser is essentially their chief financial officer (CFO), with a seat on the family board and responsibility for helping them protect and grow their family’s balance sheet. 

Crucially, this higher-level role sees advisers step back from being – or trying to be – a client’s one-stop shop for all financial matters; a concept counterintuitive to how many advisers perceive clients’ needs. Whether it’s creating a financial plan, making buy and sell investment decisions or describing how a family trust operates, many advisers try to do it all themselves.

We would argue that advisers should be less immersed in topics like insurance, investing and tax and assume an overarching communication role, helping clients articulate their feelings or concerns about their financial progress. As the family CFO, skilled advisers would then outsource and ‘project manage’ the services of other professions such as tax, accountancy, insurance and legal. We liken the role to that of an orchestra conductor, the over-arching expert able to lead a team of professionals and ensure all the moving pieces of a complex arrangement go smoothly.

As an example, asset protection is a crucial requirement for wealthy families, many of whom need to ‘build a wall’ to separate their personal wealth from any business risk.

Asset protection is an often-overlooked part of strategy that advisers need to be more involved in if they’re positioning themselves as risk-managing CFOs sitting on the family board. The adviser is ideally at the centre of a best-of-breed team, including legal counsel and accountants. This should be a collaborative effort. 

HEART TO HEART, NOT HEAD-TO-HEAD

At the practical level, advice is about understanding what a client wants out of life, then creating a program to deliver it. As an industry, we can do more to equip advisers with humanistic skills and the right mindset to get clients talking about themselves. Emotional intelligence (EQ) is the ability to recognise and manage our emotions and understand and influence the emotions of others. Put more simply, EQ has been defined as the ability to get along with other people. 

What distinguishes great professionals from the rest is their non-technical skills – the world of relationships and communication. The ability to master EQ is one of the key ingredients to great advice. Too often advisers work so hard in trying to play it head-to-head with clients and engage them in the world of intellect, but the successful ones are those who can also operate in the emotional realm. This is because logic makes people think but emotions make people act.

The upside is that the more advisers can understand how clients are feeling, the better they can ask the right questions to draw out what the client wants from their life and the legacies they will leave behind.

Conversations about how to deliver on those aspirations can then follow – but money and financial products are never the starting point. This also helps to put everyone in the room at greater ease, allowing advisers to bring real value and give the client an opportunity to articulate dreams, goals and aspirations.  

This reversal of the old product-first approach helps establish real trust between adviser and client. This concept of the trusted adviser is one of the most overused phrases in financial advice. Having a qualification doesn’t of itself generate trust. Real trust comes from credibility and reliability but also from intimacy – advisers must be able to uncover the client’s agenda, and then have the ability to create a lifetime plan for them rather than just a financial one.

A BLUEPRINT FOR CLIENT INTERACTIONS

Advisers can combine these soft skills in people relationships with actionable skills around business practice, including practical tools and cheat sheets on how to conduct client interviews. This will enable them to stay within the context of the client’s life and ask the right questions to understand how the client is really feeling. 

Context gives meaning to the content, it’s the why, content is the what, and clients respond well when we understand the spirit behind their big life why’s. It’s less about delivering products and more about listening deeply. One of the setbacks with our industry is that we go into solution mode too early, the opportunity is to spend more time looking contextually at what makes a great life for the client. 

Advisers are then encouraged to conclude interviews with a clear set of actions to help the client get where they want to go. The adviser lists each area where the client needs help to achieve their lifetime dreams – be it legacy goals, risk management etc, so that they have a scope of work for which they can price their services. The only two potential obstacles then are price, or if the client wants to do it themselves.

THE ADVICE BUSINESS OF THE FUTURE?

In the current environment of an advice industry in a state of flux, it may be that proactively embracing change is something even many already successful advisers must contemplate. 

There is a real competitive advantage for those advisers who can deliver well-articulated value. Even seasoned advisers who have done dozens of courses over the years find that developing their EQ skills and re-positioning their offering, offers tangible benefits that they can implement for future success.

There’s a lot of noise in the industry at the moment as we merge into a profession but we feel optimistic about what the future could look like.  

Scott Fitzpatrick is founder of Fitzpatricks Private Wealth.