I always read with interest articles about the way financial planners (should) charge their clients. If you scroll to the bottom of the article and read the comments, there is always no shortage of debate (i.e. vitriol) between parties who look to defend their patch, whether that be commissions, percentage-based fees, hourly rates or fixed fees. In most cases, those who leave comments are missing the point of the article, and are simply using the article as an opportunity to point score. Having said that, they are always amusing.
Most of us in the industry now accept that receiving remuneration for not doing anything is not a good look. Who would have thought? Where we continue to get stuck is agreeing what clients should be paying for their financial advice and the delivery of financial products. I have broken up these two pieces of work and for the purposes of this article I will focus on financial advice.
You can dress this up a number of ways but no matter which professional you seek advice from (e.g. doctor, lawyer, accountant, etc), as a client what you want from them is their opinion. That’s right. Clients pay you for your opinion. As earth shattering as that sounds, the basis of a professional relationship has not changed too much over the years. While new financial products have come and gone, it is your opinion that sets you apart from the next adviser.
The value of your opinion can only be determined by one person – the client. When a client sits in front of an adviser for the first time or contacts them as an existing client, they are seeking their opinion. It could be an answer to a specific question, the confidence to make a decision, the support to change a behaviour, a solution to resolve some complexity or simply some ‘tough love’ to put some perspective in their life. In every situation when a client comes to a financial adviser, they are seeking your opinion and they trust that your opinion is better than some other adviser.
When you charge for your opinion, again it is the client who will determine whether what is proposed is valuable. The industry can jump up and down for as long as it wants about how much advice costs. However, if the client doesn’t value the financial adviser’s opinion, they will not pay for it. As Certainty Advice Group’s Jim Stackpool says, “Clients pay for things they can’t afford all the time because they value it.” Think about the houses, cars, holidays, etc clients pay for.
If clients perceive value in the opinion of the financial adviser, they will pay for it. They won’t pay an ongoing advice fee for the bells and whistles of the new superannuation fund being recommended or the online report of the latest investment platform. That ship has sailed, and for those still clinging to that boat, best to hold on tight.
Next time you are sitting in front of a client and seeking their ongoing engagement, remember the true basis for a valuable client relationship. Make sure you express your opinion and always share it with your clients. Don’t just save it for leaving a comment at the end of an article about fees.
Ben Smythe is managing director of Smythe Financial Management
Thanks Stephen – yes the scope of service for what a Financial Adviser can offer a client continues to evolve – one of the many reasons why now is such a great time to build a unique and valuable advice business!
That is a great article Ben, I totally agree, however I would also emphasize that an adviser these days, has to be up to date in areas of not only financial advice, but economics, business strategy, HR trends and of course empathy with the client.
I think also that the education levels of advisers do need to increase, if not only to expose them to more areas of advice. This may not suit all advisers, however, they are the ones, in my opinion, that will be left behind.
Thanks for an enjoyable read.