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An adviser / Client marriage. Cutting off the blame finger

The key to fruitful, rewarding advice relationships is that both parties clearly understand their role and accept responsibility for their part. Peter Malekas writes. The advice relationship, like any relationship, is about team work. There are effectively two parties working toward a common goal but each party has a different role to play in order for them to collectively achieve results and enjoy good, sustainable success. Put simply, it’s a case of “you do your part, I’ll do mine and we’ll see results”. The key to a fruitful, rewarding advice relationship is that both parties clearly understand their role and accept responsibility for their part. It sounds perfectly reasonable yet traditional advice models, which are geared toward selling financial product, ask very little ongoing of the client outside the initial Q&A or fact find. Instead the burden of responsibility is placed on the adviser. It’s their job to secure adequate insurance cover; build and manage the optimal investment portfolio; and maximise the probability of a client achieving their goals. The client only has to show up a couple of times a year and pay their bill. But it’s not a model that has consistently delivered improved client outcomes nor has it lead to high client satisfaction. In fact the reverse is true. Customers are increasingly disengaged. Practice management consultancy Astute Wheel estimates that disengaged clients represent as much as 30 per cent of a practice’s clientbase^. Furthermore, a key driver of the government’s reform agenda is to ensure disengaged clients aren’t paying ongoing fees for low value, or transaction-based planning services. The exponential growth of the self-managed super fund (SMSF) sector and the increasing popularity of automated advice solutions prove that many people don’t want a financial adviser to do it all for them. Many have said “I want to do it myself” while others are saying “I want to do it together”. It’s evidence that consumers don’t view responsibility and accountability negatively. Accountability is not about pointing the blame finger. It’s about empowering people to play a more active role in their financial affairs, keeping both parties in check and together owning the outcome with both parties knowing that without each other, they would not have achieved it. Embedding guidance and coaching on saving, budgeting and cashflow management into the advice model is one way advisers can foster deeper client engagement; educate people about the impact of their lifestyle or habitual financial behaviour; and give them greater responsibility. The advice relationship becomes about joint responsibility and shared accountability, ultimately leading to shared celebration. In this type of relationship, the adviser is akin to a financial coach or mentor. Using a fitness analogy, a personal trainer can assess a client’s goals and ability; educate them about the benefits of exercise and nutrition; design an effective exercise program; and encourage them to pursue a healthy active lifestyle but they can’t force a person to put down the donut and get off the couch. There are clear limitations to what a personal trainer can do. Similarly, in the advice relationship, there are things the adviser is responsible for, tasks the client is responsible for and areas of mutual responsibility. Who’s responsible for what? A client’s responsibilities fall into three categories:
  • How much they earn, and maintaining or increasing their earnings.
  • How much they spend and how they’re spending.
  • How much they save, which is the difference between their earnings and spending.
Based on the output of a client’s “earn, spend, save” responsibilities, an adviser’s role is to educate the client about the impact of their financial behaviour; determine what they can realistically achieve in terms of earning, spending and saving; help them develop healthy financial habits; uncover their long-term goals, objectives and priorities; develop a robust financial plan which will maximise the probability of them achieving their objectives with acceptable risk; and execute, manage and monitor that strategy throughout the journey. At some point, advisers must share some accountability for the output of the client’s “earn, spend, save”. By separating the adviser’s role and the client’s role, both parties fully understand who’s responsible for what and when, and together they can measure each other’s performance, and the performance of the overall strategy. The mystery around what a financial planner does is removed, and the industry’s proposition is clearer and more transparent. You’re off the team Having the buy-in of both parties is critical to success. If a client isn’t doing their part, an adviser should look at whether the goals set are still realistic. If not, they should be adjusted. On the other hand, if a client simply isn’t willing to do their bit or take on responsibility to make the necessary changes when and where they fall due, and the advice relationship isn’t productive, then the adviser should seriously consider ending it because it’s unlikely the client will achieve their goals, meaning both parties will be unsatisfied. Ultimately the adviser shares joint responsibility for the outcome if they continue to collect advice fees. From an adviser’s perspective, by incorporating saving, budgeting and cashflow advice services and tools into their value proposition and making clients responsible for certain tasks, they can quickly identify those who are teachable, committed to the advice journey, and enjoyable to work with. Traditionally, it has been challenging for advisers to identify problematic clients. Those same clients typically go on to point the blame finger down the track. Let’s celebrate When both parties perform their role well, not only will there be plenty of cause for celebration but there’ll be a great sense of achievement. From a client’s perspective, it could be paying off the home loan sooner, sending the children or grandchildren through private school, being able to take the family on an overseas holiday or building a retirement income portfolio that will provide a comfortable lifestyle for life. While advisers will get a kick out of seeing their clients achieve their goals, the flow on effect will also include higher client satisfaction leading to higher client retention. It will lower the probability of client complaints, and hopefully lead to more referrals. Peter Malekas is managing director of Moneysoft ^ This article was also published in Professional Planner under the title ‘Cutting off the finger of blame and sharing responsibility’ on April 18th, 2016