Category: Blog

I get the feeling we suffer from a false sense of certainty that we’re speaking to the people that really matter when doing Financial Planning. Because we see clients, mostly as individuals, we’re leaving out critical pieces of how decisions are made in any household. Marketers figured this out a long time ago, the difference between the ones who “influence” and those who “pay”. This scenario plays out most vividly, when walking through a supermarket with a child. There’s a whole bunch of stuff aimed at the kids, as influencers, rather than the adults, as payers. It usually has bright colours, a ton of sugar and is neatly positioned within tiny-arm’s reach of the children’s trolley seat. If you have kids, I think you’d be foolish to agree that the child has no part in the financial transaction that is about to take place.   

Similarly, Financial Planners that speak to me as the only decision-maker, have me figured out all wrong. Even if I think I’m the one who’s in charge, practically, the flow of money in our household happens through the actions of more than one party. As much as I make commitments for my (our) money so too does my wife. Both the big and small stuff passes through a series of actions, either accepting and shirking responsibilities between the family memebrs. My mother-in law even makes a dent when she comes to vacation for a few days. 

On reflection, I realise that Financial Planning conversations that happen with one person, is like trying to get commitment from half a head. Even if I make a promise, that good intention will be immediately undermined the moment the other half of my brain / marriage gets caught up in a hedonistic act of retail therapy. We struggle enough keeping even our own emotions in check. Being the support structure for one person struggling to satisfy their greed and run from their fears is difficult enough. Add a spouse. Some children. A business partner. And things get messy.

It’s time to start sitting around the table with everyone present. The fact that one person signs the contract doesn’t make the off-screen shenanigans any less real. 

And just maybe we’ll increase the chances to add more value. And earn more fees.

Does the word “compliance” send chills down your spine? I get the sense that “compliance” is still seen as this thing that makes, what would otherwise be a rather engaging experience between advisor and client, become a bureaucratic series of forms, signatures and fine print. And I think that to a large degree, that’s still true, since Compliance is a function, mostly managed separately from other areas in the business, not too dissimilar from IT, HR or Finance. The consequence of having it in a silo is that it becomes this thing that sits “outside” everything else in the client engagement process – a distinct “process for compliance,” rather than a, “single process that is compliant.” 

I think that there is lots of value in the stuff that our Regulator puts out to the market to help manage our relationships with clients. I like to think of these pieces of regulation as valuable input from our clients – information which gives us insight into what our clients need from us. Listening to the Regulations, in my role as a Compliance Officer though, I am probably going to hear something like, “We need a legal document titled Record of Advice. Plus it needs lots of fine print.” Or maybe, “We need another legal document titled Disclosure Document. Also, with lots of fine print.” 

There is though, another perspective that we could use to understand what the Regulator is offering up to us. Listening to the Regulator as the “Guardian of the client value proposition,” I’d expect we’d hear something quite different. I expect for example, that we’d pick up on the insight that clients like to understand the reasons for the recommendations that we make and having them available as a reminder for when they’ve forgotten, would also be helpful. That’s going to take us to a very different place in terms of what we stick in front of the client. The second perspective, creates space for the client need to be met in a way that is meaningful and enjoyable for the client. It will probably manifest in the engagement process very differently to a fine print legal document … maybe a different planning tool, a facebook post, a playful sound bite, a personalised comic strip, a youtube video. Who knows what innovative stuff we can come up with in the context of “building it as part of a pleasurable experience for the client.”

Getting back to “building (an awesome) Advice Process that is also compliant,” we need to think carefully about the stuff we do for “Compliance” from the outside-in. In other words, let’s start from the client’s perspective, not Compliance’s, to decide what we put in front of the client to meet Regulations. If we take the view that the regulations help us understand what clients need after all, we can start meeting these needs as a core part of our offering to them, not a sideline document that we pretext with, “Agg, Compliance makes us do all this stuff, it’s nothing important, just sign here.” 

To do this, we need to partner closely with our Compliance colleagues, collaborating together on one process that is the overarching experience that the client walks away with. There is no “relationship” which is separate from the “compliance process.” There is only one experience and we have to come together to make it an awesome one.

Is choosing a financial planning tool a straightforward process? I’ve been on the choosing end of a financial planning tool on more than one occasion in my life, enough to know it’s not as simple as it seems. I’ve had the experience, both as a corporate buyer on behalf of advisors, but also, as an advisor on behalf of clients, each with surprisingly different outcomes.

As a “corporate buyer,” I put on my rational, “advisor hat” to assess the options. This had some interesting consequences … I was especially concerned about the detail, the decimal point accuracy of the calculations and the extent to which everything was covered. I counted the features, tabulated the options and carefully compared one tool against another. It seemed about as scientific a process as one can possibly perform, the winner, outperforming its peers with a resounding “seven features more” than the others. A conclusive contest if ever I saw one!?!?

What I wasn’t counting on, was how the sum of the parts did not equal a positive user experience, neither for clients nor advisors. Needless to say, our tool of choice needed lots of training and took on an ongoing stream of mumbling and grumbling with very little return in terms of productivity and happy client feedback. 

Learning from my initial “rational approach”, my next lesson happened as an advisor. I swapped out the rational, “advisor hat” and in it’s place put on a “client hat,” which  came to a surprisingly different outcome. I stopped counting the features and focused squarely on the experience that could be created between the advisor and the client. I even considered “feelings.” Needless to say, we came to a remarkably different conclusion from an essentially similar set of options. Let’s just say that the new outcome was materially more successful, not only did the solution massively take away from the “training and complaining” but clients loved it. 

In reflection, I learned a few things … The biggest lesson is that it’s not always clear what we want from a planning tool. It’s not always clear what consitiutes a “successful outcome.” We may think it’s obvious but we can be easily misled. My first attempt, focused on “efficiency optimisation” a good outcome by any standard … “Does it do a monte carlo simulation? Does it calculate an RA deduction? Does it do … blah, blah, blah…” Unintentionally, I found myself measuring the options based on my needs “as an advisor.” I was looking for a solution to quieten my OCD, to relax the anxiety I felt about not knowing the future. None of which took me nearer to achieving my unsaid (actual) goal … to help clients live their best lives possible.  

I realise now, that to achieve my goals for my clients, I need to be asking a different question, looking to measure a different definition of a “successful outcome” … “Does the tool enable an advice conversation, based on empathy and trust, that elevates the client and moves them forward?” Only by putting my own anxieties second to what clients need can I uncover a solid framework for choosing a solution that gets me closer to my true goal. 

In conclusion, I realise that we put at risk our ability to be effective in helping clients to move forward, when we put our need to optimise stuff to be 100% accurate in the driver’s seat. We need to choose stuff in our practices that gets clients to affect positive change in their lives, over, getting an “estate duty calc” perfectly. Both of these outcomes might be deemed desirable, but in a world where the client experience is the deciding factor, we need to choose which one we will pursue first.

Is “Client Engagement” the new buzzword? 

It strikes me as a word that we all use a lot but actually have very different pictures in our heads of what it means. On one end of the spectrum, it’s hard not to do “client engagement.” With a quote in the briefcase and some quirps about the weekend’s rugby, we’re already equipped with a very medieval version of it . Add a few evolutionary decades to this version and we get to the other end of the spectrum where client engagement has become more clinical, more scientific and undoubtedly more compliant. Between the two, it’s easy to pinpoint which one makes the advisor feel more valued. I think it’s a different question altogether to be asking which one does the client value. In truth, it feels like both versions fall short of actually connecting with the client in very fundamental ways.

I think we’re progressing to a new space which clients are using to decide whether our engagement is valuable. Here are some new factors that create the magic around whether our efforts are deemed positive or not …  

First, the advisor must be completely comfortable with the engagement process they intend taking their clients through. If they’re anticipating questions that they’re not entirely comfortable answering, this tension will feed quietly into the engagement, colouring it with anxiety and discomfort. Are you comfortable with the artefacts you’re using? Is it a tool? Can you find the right buttons? Are the pictures easily explainable? Are the assumptions clearly understood? Are you clear on the outcomes you’re trying to achieve in each phase? 

A simple, clear process with props that enable a relevant and meaningful exchange of words is the cornerstone of raising confidence and lowering anxiety when we never know which way the client may go.

Secondly, the client needs to be completely at ease, open to engage on personal, sensitive topics. How comfortable is the client? Are they sitting on the edge of their seats waiting to look at another picture or table they don’t understand? Are you showing them stuff they can relate to, comment on? Do they feel like you’ve heard them correctly? Do they feel like they could equally drive the process if you handed the “talking stick” over to them? 

Giving the clients feedback to show that they have been heard, that you consider their contributions as important shows that you care. Demonstrably showing your interest, being open to changing things, being vulnerable to working together, inspires meaningful engagement and intimate levels of trust. 

Third, the other important people need to be on-board. Are they on the financial picture? Are they in the room? How are they feeling? Can they connect with the story you’re painting? Are they contributing to the story you’re building together? Can your engagement become the golden thread that starts managing expectations and growing clarity between family members? 

We all too often discount the impact of other people on the effectiveness of our advice. We’re social beings and having all our important relationships singing in concert promotes proper engagement between the influencers that count. 

In conclusion, not all client engagement is created equal. Shooting the breeze may be enjoyable, but neither effective nor deep enough to affect change. On the other hand, being analytical and clinical, may be compliant, but it too, is neither effective nor is it a way to open up a space for clients to be vulnerable and get to the core of what drives them. 

If you’re skating along the surface of your relationships, talking about the “professional detail”, or rugby, I put to you that you haven’t yet scratched the surface of meaningful engagement that truly enhances the client’s experience of your value.

It’s a tough task helping clients to connect with the complexity of their money, especially as wealth and the number of associated structures increases. If that’s true, it also means that clients don’t really understand the value that we’re adding to their lives. They’re still clients though, probably, for other reasons. Ever wonder what those reasons are? Nice offices, thoughtful birthday cards, friendly staff, good coffee? Are these reasons sustainable looking forward? Are they a good foundation from which to grow fee income off a tangible value proposition for the future?

Why aren’t clients connecting? It comes down to the experience that they have with us. We’re a very “left-brained” profession, which has meant that the basis for engaging with clients has largely followed suit … technical discussions, jargon-laden language, lengthy word documents, spreadsheets and maybe the odd graph. Understandable though, given the amount of regulation, analysis, and complexity that we need to cut through. Even so, it’s an unfortunate reality that we carry all this “rationality” through to our client relationships, especially considering the learnings we’ve taken from behavioural finance. We know that clients are actually anything but the left-brained, “rational” humans we all thought we were. Fifty years later (!), we have scarcely taken these learnings into the engagement process that we have with clients.    

Clients just don’t connect with the same stuff that we do. They don’t care about the complexity of the regulations, the intricacies of the sums that we do, the fine print in the contracts. They care about leaving a legacy. They care about seeing their children thrive. They care to know that they’re safe. They care about feeling good about themselves. These are the ingredients of a value proposition that forms the foundation from which to sustain a practice and grow fees.  

If we’re leaving clients rather, feeling dazed, confused and generally overwhelmed you can bet your bottom dollar we fit into the “grudge purchase” category. We need to take an outside-in view of the service we offer our clients. Start with the feelings we’d like to stir in our clients.  If we’re crystal clear on that, we figure out the relevant conversations, technology, documents, and stories that will get us there. 

Everything can still be “technically correct” to meet our personal OCD requirements, but what we exhibit for the client cannot be the same!

Behavioural economics has helped us to understand that we’re not actually the “rational” beings that we like to think we are. We now recognise that we make decisions and behave in a way that is anything but rational – we’re biased in how we see the world and a whole bunch more emotional than we give credit for. In the investment space, we’ve made up a whole new language to describe how un-rational we actually are – loss aversion, anchoring bias,  hindsight bias, familiarity bias, etc, etc. We teach this to our clients, manage their behaviour and watch our own responses in managing our clients’ money. BUT, are we conscious of how engrossing these insights are for EVERYTHING that we do for clients?

If only we could recognise that we’re actually emotional, irrational people all the time, not only while we’re investing. We’re also not rational while we’re making coffee, shopping, watching TV, going to the dentist and EVEN when visiting our financial planners. So if we’re having an experience that’s meant for the “rational man,” we can’t connect.

As financial planners, we come from a space that is inherently “rational.” There’s lots of regulation, lots of numbers, calcs, risk, efficiencies, and, of course, money. It seems understandable then that introducing feelings and some “irrational” into this space is a bit like squeezing a square peg through a round hole. But unless we give careful attention to every moment we subject our clients to, we’ll never get them to truly connect.

Think of the typical engagement process an individual goes through to become a client. Invariably there’s a “disclosure document” somewhere at the start, a consequence of regulation saying that we need to disclose a whole bunch of stuff to the client. Regulation didn’t say stick a two page fine-print document in front of the client though. The document is rather built for the rational, compliance manager – not the client. The unfortunate outcome is that the client experience turns to rubbish but compliance is happy. I’d sooner try make the client happy.

We do this kind of thing right the way through the process. We speak in words clients don’t understand; present documents they don’t care about; graphs they don’t like; instruct them to do things they’re not committed to; and in general go about doing a whole bunch of stuff because that’s the way it’s been done for the last twenty years. On behalf of clients, we desperately need to recreate our client engagement processes, starting from the client’s perspective first. Once that’s clear, we can work outward to figure out how to make compliance, regulators and planners happy as well.

What do clients care about? It’s profoundly simple but we keep missing it. Clients don’t care about the rational stuff that rational people should care about. We care about how the experience makes us feel. We care about meaning. We care about significance. We care about whether the experience made us FEEL GOOD ABOUT OURSELVES!

As Financial Planners, we need to bring about a new way of assessing the extent to which we’re doing a good job for clients. It’s no longer about how compliant we are, how detailed our calcs are, how clinical our data collection process is, how efficient our back-offices are. We need to start figuring out how good we’re making clients feel about themselves. We have to re-evaluate every moment in our service offering to understand the extent to which they feel good about themselves or not. Or risk the rest of the world leaving us behind.

We have to point clients in the right direction to take their next step, in the context of their destination. If they’re on a road-trip to Zanzibar, let’s help them get out of Cape Town first. Once they’ve reached Worcester we can help them with the next step. Instead, it feels like we’re intent on giving them the point-by-point directions for the whole journey all upfront and all the time. Often, the outcome, is that clients get lost before they find the on-ramp to the N1.

Think of the parallel between this overwhelming set of instructions and the stuff that we present to our clients in the planning process. Not only are we overwhelming them, but we’re giving too little love to the overnight stop in Nieu-Bethesda, the huddling around Lonely Planet the night before and then exploring the local fair before setting off on the next part of the journey (maybe two weeks later). We know that there are like a kabizillion things that could change between here and Zanzibar and yet, we’re still stuck in the molecular detail of the whole trip all the time. In the context of the real world, our “estimated arrival time,” based on a gazillions of assumptions loses relevance.

It feels contradictory to speak to clients as if the world is static and knowable, sort of like we describe our planning processes – in terms that promote accuracy and scientific inflexibility. Think about the process of “building an investment strategy,” by definition, an imprecise outcome (the return) managed with a painstakingly precise and detailed process. And then we all get confused when we mix up the “process” with the “outcome” – it’s the process that’s precise, not the return. If we’re driving home this level of spurious accuracy all the time, where actually, the best we’re able to do is make big obvious changes in movement, the client is bound to get bored or lost.

I feel like we’re missing a trick, leading clients to think the detail is figured out and pretending it’s static. I’d like to think we could trade time painting the detailed hypothetical picture of the future for more behavioural management in the present. Feels like there’s more to do in seeing the BIG PICTURE, embellishing the here-and-now and stacking goals in relative importance in the context of an inherently imprecise world.

“Financial Planning” is the business of moving people toward “financial happiness”. I sometimes get the feeling that we’re in the business of “administering product”, “financial analysis”, “asset management”, “data management”, or one of any number of operational things we do in the background. These may be some of the tools that qualify “HOW” we move clients to financial happiness, but they are not what the client is paying for, or what the client values.

Similarly, it feels like we are sometimes our own worst enemies. Not all clients need the super-impressive-mega-techno financial plan thrown at them to experience a material change in their lives. Too often, we are over-delivering to a client that needs something much more basic. And we’re doing this to gratify our own insecurity rather than hearing where the client is at and delivering appropriately. Like a parent that offers too much to a child’s innocent questions about the world, so too do planners jump headfirst into their worldview of what the client needs. “Am I doing OK financially?” gets answered with an anatomically correct, embarrassingly gratuitous description and re-enactment of the undertaking of intercourse.

Not only are we trying to meet our clients at a point they haven’t yet reached, but we’re wasting precious energy of our own. Toddler clients will take extreme value from the features of an advice process that are the simplest for you to deliver. Might be the first period of your long-term relationship is not doing a single calculation, but rather educating the client around better financial behaviour. Maybe drawing them a simple pic of all the financial aspects in their lives? Doesn’t mean you’re not adding value and can’t take a fee. On the contrary, you’re delivering relevant value at the appropriate time in that client’s life stage and can certainly charge a fee in compensation for the value added, rather than the time spent. And it mixes things up a bit for the client, they don’t get the same document every six months for the rest of their lives (which they probably don’t actually ever read or understand).

We can’t paint all clients with the same brush, try and slam them with our “mega offering,” every time. Not only will we not be connecting with our clients, but we won’t be “sweating our assets” because every ounce of energy is sucked up in the delivery of an elaborate service where attention at a molecular level are the key measures.

My sense is we’re stuck in a world where value is directly correlated (as measured by us, not clients!) with the complexity of the financial plan that is constructed and the product that is implemented. We completely undervalue the other elements, also part of the process, like “listening to clients”, “educating them”, “helping them to understand”, “creating awareness”, “coaching them”, “setting goals for them”, “assuring them”, “getting them out of trouble”, “changing bad habits”, “creating better habits”, “debating and connecting”. Many of these are inherent in the “the mega offering”, but some clients just want a kick up the pants and are willing to pay handsomely, just for that. In that case, why are we doing all that other stuff? Is it really for the client.

I’m not keen to continue working too hard for too little appreciation … not only are we undermining our ability to progress financial happiness, but we’re also undermining our ability to deliver it for more clients.

Financial Advisors struggle to show clients that there is value in the stuff we do for them. The consequence is that clients are completely indifferent to the services we offer and extremely price sensitive, at best. So, how do we stand out, change our perception as a “grudge purchase?” How do we get clients to want to have a relationship with us? How do we give them an experience that they will drive across town, in the middle of their busy day to visit us? How do we make them feel like money spent with us was a valuable commitment?

Chatting over coffee yesterday, my cycling buddy and I were lamenting our relationships with our respective “back technicians” – a troubled spine being the defining characteristic of any wannabe cyclist. I was amazed to hear that his Physio of choice was all the way out in Hout Bay, a journey he was happy to make despite the distance. Wow!! His perception of value must be really high to take on that drive. I wouldn’t be willing to do the same for my chiropractor. In fact, I’m beginning to think he should start coming to see me to keep the relationship going.

I used to value my chiro’s services extremely highly but my sense of value seems to have been on a gradual decline since our first few engagements … he used to begin the treatment by buzzing this big compounding machine on my back. It wasn’t pleasurable per say, but definitely had a way of punctuating the start of the session. It would violently rattle all the bones in my spine to what felt like a state of complete resignation, a good place I suspect for the next iteration of clicking and twisting to begin. Then one day, I went into his rooms and the tool was gone, broken, not to be replaced. Seems silly, but I still think about that machine. It represented a part of what I deemed important in the experience. Now that it’s gone, it feels like I’m missing a whole step in the process, only getting three quarters of the value I used to.

Then his fancy table broke, not unlike a Formula One car’s steering wheel, with astronaut controls pivoting it in all different directions. Broken. Again, I felt like something was missing. Both of these tools were not only cool, but they framed my experience by reminding me that I couldn’t get this at the nail-bar beautician down the road.

The funny thing on reflection … I realised that actually what I kept going back for, was the experience. NOT the fact that he’s “fixed” my back. In truth, my back is always, to a greater or lesser degree, “broken.”  Having dumbed-down the experience now, it feels like his treatment is more or less what I could get anywhere, even the nail-bar down the road. And I’m certainly less chuffed to shell out the R600 for a quick rub.

This feels exactly like the problem financial planners face. We also face clients that are suffering from chronic back-pain in the form of ongoing confusion and discontent with respect to money and finances. In this world we need to be especially tuned in to the factors that create value and pleasurable experiences, to keep clients returning. If we’re like the chiropractor, we could easily make the mistake of thinking that “access to product”, a monthly newsletter, some fancy looking graphs and a “50-page report” are good enough reasons to to charge a fee. If we judge value according to the things we deem important, we’re not going to arrive at the right answer. We get excited by the analysis, the scenarios, the regulations, the do’s-and-don’ts, the detail. Clients … not so much. What they’re looking for is a big, buzzing machine and an astronaut table.

I think we can have a discussion about what defines an awesome planning experience, but I know, almost for sure, that the things defining it today, aren’t it. In fact, while everything around them has evolved, the experience advisors put out for clients hasn’t changed for decades. If anything we’ve gotten better at throwing more of the same stuff at them, more stuff they don’t understand or care about.

My sense is we need to take a long hard look at what we subject clients to. Put yourself in their shoes. I’m certain you will find that you’re massively effective at getting product implemented, affecting service requests, sending reports, doing calcs. What I think we’re lacking is a fundamental ability to truly connect. We’ve lost (or never had?) the ability to show with empathy that we’ve listened to their stories and are responding through their world-view rather than our own. We’ve become a highly mechanised process that has lost the ability to connect clients with the heart.  And again, an astronaut table wouldn’t be half bad.