Financial planning, and the professionalism of the industry is under challenge. The challenge is not from existing clients who are actively engaged in the advice process. These clients overwhelmingly regard their advisers in the highest terms. In fact studies indicate that as a means of rating their advisers the average financial adviser attains net promoter scores in the 50’s. Further, advisers who we would regard as at the top of their game, who have developed and deliver a client centric experience, tailored to the researched needs of the individuals receiving the advice score in the 90’s.
Rather, the challenge comes from a combination of sources as the industry undergoes the FOFA series of reforms aimed at increased professionalism and improved quality of advice and to an extent this has been driven by consumer dissatisfaction and regulatory concerns over standards within the industry . What has eventuated, with this focus on the industry, has been an illumination not only on examples of best practice but also shone a light on practitioners who were not making the grade. That is what a reform process can deliver and what’s important to remember and to convey to consumers is that the vast majority of advisers enhance the lives and financial well-being of Australians.
The well-being of individuals, has become a measure of the societal progress of populations alongside measures such as GDP and life satisfaction measures focus on an evaluation of the individual’s life, for example, by asking “Overall, how satisfied are you with your life?” Individuals arrive at a summation after considering a number of important aspects such as health, family life, social relationships and finances . It follows then, as Irving (2012) points out, that Financial planning goes beyond the giving of insurance and investment advice. The process of financial planning delivers a strategy that takes into consideration all aspects of lifestyle, goals and requirements to help individuals reach their financial goals effectively and efficiently. The process of financial planning when delivered in a sequential, manner according to Irving :
• guides individuals in a goal oriented and systematic way;
• formalises behaviours for accomplishing outcomes and;
• provides a means of assessing progress.
Looking deeper at what drives human behaviour, the work of Lawrence and Nohria , identifies at least four hardwired innate drives that shape our behaviours and choices. Those elements, the drive to acquire, learn, bond and defend, fit neatly into the advice process as advisers educate clients as part of a discovery process to illuminate what is important to the client, and provide strategy solutions that allow clients to set a foundational platform to build towards their well-being goals and desired outcomes.
It flows then that as summarised by Irving (2012), the provision of best-practice financial planning is likely to have positive influences on individuals’ well-being and life satisfaction. The actual process of planning and the manner in which it takes into account goals, wants, values and motivators is core to not only the success of the planning outcomes but the overall well-being of the client.
Crucial then, to maximise the outcomes of the process, is to unpack each step of the financial planning process and discover what best practice looks like, what the client experience is and what it needs to be during the process and how businesses can deliver repeatable, sustainable and measureable processes to enhance client outcomes.
Professionalism embodies the notions of relationship quality, communication and ethical practice , so why has the financial planning industry been unable to enshrine the concept of professionalism in the hearts and minds of consumers? The process of financial planning provides a key to answering this question. The traditional process for financial planning has at its core a simplicity and an implementation that utilizes a prescriptive software illustrated approach that does nothing to unlock the mystery that is the black box of the advice process.
What’s missing here is the positioning and context of how the process will in fact make a meaningful change to an individuals circumstances to obtain the outcomes that are important and relevant to them. The focus is on a service and not on a collaboration. Some advisers however have taken this process and created models that emphasise a focus on values and motivations .
What has occurred with these leading advice firms is that they have unpacked the advice process and connected it, demonstrably, to the outcomes the client wants. This has meant a connection illustration where the client is bonded with people ‘like’ them. Using the concepts of social proof and liking (whereby people will do things they see other people doing, particularly those people they can associate with ie: like) these businesses explain the financial planning process in ways that connect it to a path others who have gone before them have travelled. Thus the process becomes less feared and more likely in the clients mind to be able to deliver the outcome that is desired.
There is value and benefit for all parties when a process towards best practice financial planning is positioned in this way. The process has positive impacts on well-being and satisfaction with life because it addresses lifestyle aspirations, values and goals . The methods of best practice positioning of the financial planning process can be summarized into client experience checkpoints that businesses need to enact if they are to be successful in delivering the entire process and having buy-in from the client to do so:
• the firm has a concept of the types of clients they can specialize in and like working with
• the firm develops capabilities to deliver needed specialized services and resources to their desired client set
• the firm positions the typical outcomes these types of clients have in the messaging and value statements they make about the services they offer
• the firm takes new clients through a process where client stories are illuminated so that the prospective client can associate and relate to the outcomes produced
• the firm takes the time and provides the resources for clients to participate and collaborate in the advice process
Increasingly then firms delivering best practice advice are utilizing techniques and tools such as mind maps, lifestyle questionnaires, wealth indices, personality profiles and wealth choices diagnostics, to engage clients, set benchmarks for communication, engagement and outcomes and in so doing are winning the hearts and minds of clients and delivering not only financial but psychological well being outcomes.
According to the Financial Planning Association the steps undertaken by a professional adviser when advising a client are :
1. Defining the scope of engagement;
2. Identifying goals;
3. Assessing the clients financial situation;
4. Preparing the financial plan;
5. Implementing the recommendations, and;
6. Reviewing the plan.
From a client psychology standpoint at each stage of the process can be attached to an underlying factor in positive well-being. Irvings 2012 work in this regard is substantial and we have expanded further here to explain exactly how clients are feeling at each point of the process.
1. Defining the scope of engagement; This promotes positive well being as the client starts engaging with basic life tasks: clients feel competent in managing everyday life and can take advantage of new opportunities. They can organize their life, work and home situations to match their needs and values. Known as ‘environmental mastery’ .
2. Identifying goals; Clients acknowledge they have goals for their life and develop a sense of direction in working toward them. They have beliefs that support a sense of purpose in their own life and life generally .
3. Assessing the clients financial situation; A realistic appraisal of a current state of affairs and a desired state of affairs reduces (potentially) the stress and strain of financial concerns, particularly if the client can see themselves working towards minimizing the gap. As a result they can feel good about where they are at financially and accepting of both strengths and weaknesses.
4. Preparing the financial plan; The plan is the enabler of the client, with one of the major benefits of long term planning is that it enables clients to start to compensate for a lack of resources and to maximize the possibility of even achieving better outcomes than people who had those resources but didn’t make a strategic plan.
5. Implementing the recommendations; As Irving (2012) notes the implementation process sets in train the progress towards the pre-identified goals. Further, enacting positive financial behaviours is an important component in overall well-being
6. Reviewing the plan; encompasses all of the above steps, and re-inforces the positive progress and psychological benefits of the process.
Knowing these processes is not enough. What leading advice businesses do at each step of the process is to stop, review, clarify the client experience and reinforce the progress. They use claims assistance guarantee promises, client assurance messages and formal assurance communications. Further they have embedded into their client process touch points that each member of the firm understands are crucial in delivering a positive client experience in line with the journey through the financial planning process steps.
References
Kym Irving 2012, The Financial Life Well Lived, Psychological Benefits of Financial Planning, Australasian Accounting Business and Finance Journal
Paul Lawrence and Nitin Nohria 2002, Driven : How Human Nature Shapes Our Choices
