“Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself.”
— William Faulkner
What makes good advisers, great?
Given that we’ve reviewed over 8000 client files since 2012, we’re well placed to draw relevant conclusions from rich data.
We’ve reviewed risk specialists, institutional and aligned advisers, SMSF experts, industry fund representatives, boutique licensees, stockbrokers and a range of advice professionals across Australia.
Financial planning can be bureaucratic, complex and complicated, but some advisers make it look easy.
Here are three characteristics demonstrated by the best advisers
1. They prioritise understanding over disclosure
We’ve long believed that the legal obligation to provide “clear, concise and effective” advice was an early victim of Licensees’ industrialised advice processes that prioritised disclosure and ignored consumer preferences. In reality, they strategically embraced formal compliance not for the benefit of their advisers or clients but to maximise its own efficiency and minimise its own risk. In reality, and despite their dogged perseverance, their strategy was spectacularly unsuccessful. It failed to either maximise efficiency or minimise risk, but many advisers still cleave to ‘disclosure’ in a sincere, but mostly forlorn, hope of avoiding adverse attention.
Process has its appeal and the institutional licensees’ approach is not necessarily flawed, but it’s not a sustainable strategy while disclosure is more important than either client understanding or client engagement.
Successful if it does mean that many of the advice documents provided by their representatives are generic, poorly structured documents slightly adapted from client to client.
The better advisers take the time to reconcile the tension between mandated uniformity and individual clients’ needs and preferences.
These advisers also humanise their Licensee’s framework to engage, educate and provide deeply customised advice.
The better advisers seem to intuitively understand that a sustainable advice relationship requires both intimacy and genuine understanding.
Consistent with the FASEA Standards, these advisers take the time to identify and confirm their clients’ needs and circumstances. They often re-structure, or re-emphasise, information to provide clear, logical and comprehensible plans of action.
Moving beyond disclosure doesn’t mean abandoning, neglecting or trivialising your obligation to address risks, costs, consequences and implications; it simply means not being satisfied with formal disclosure.
It means filtering, translating and contextualising generally meaningless and disconnected data and presenting a clear and compelling solution (expressed in a style relevant to your client).
I appreciate that this is an outcome at odds with the ‘efficient’ industrialised advice process so beloved by so many, but despite the consistency and predictability it offers, it’s inconsistent with professional services.
In defiance of current expectations, the additional time they take is often reflected in higher engagement, better conversion and more longevity.
The better advisers recognise that advice is not a commodity but a highly-personalised product that results from the application specialised skills. They also don’t take their clients’ trust for granted but work, consistently, to show they deserve that trust.
Their documents aren’t simply disclosures, disclaimers and disconnected statements of facts (with product recommendations). Instead, they contain clear and compelling narratives that address their clients’ real circumstances and needs.
- Consider whether you spend more time explaining the solution then identifying and prioritising needs.
- Map how many disclosures and disclaimers you make, consider how and where they are presented and think about how much work your client needs to do to connect and contextualise that information.
- Ask your client to explain the recommendation you made (and the reasons why its appropriate).
- An SOA is dense and difficult to both prepare and read. Take the time to think about what an SOA would like if it were easy.
- Take coloured highlighters to your SOA template and differentiate between legislatively mandated content, licensee content, templated text, habitual additions and customised information (exclude factual data). Remove unnecessary content.
- Kill anything that frustrates your clients’ understanding your advice and its consequences.
- Think about whether, and to what extent, your prioritise product recommendations above your understanding of your client and their needs and circumstances.
- Does your recommendation elicit an emotional reaction from your clients? If no, rework your documents.
- Consider whether the pace, timing and structure of your discovery process is designed for your benefit or for your clients. Would taking more time, or breaking the process into seperate meetings, improve client understanding.
2. They ask clarifying questions
Frequently, we see recommendations documented in the adviser’s initial meeting notes or fact find.
All too frequently, we see recommendations documented before the initial meeting and before the discovery process starts.
One of the most pernicious advice fallacies is that all advice is the same. Admittedly, taking this approach has significant advantages; it optimises plan production, minimises system complexity, maximises revenue and delivers consistent product inflows. We’ve seen practices where every client is recommended the same platform and insurer, where every client needs an MDA and where every recommendation is compared against the same (very expensive) product.
The drive for efficiency is understandable but, unfortunately, the advantages it provides seldom benefit the client.
The better advisers we’ve reviewed, humanise (or materially reject) the industrialised advice process.
To be clear, they don’t freestyle without any process or parameters, they simply don’t start with the pre-conceptions and assumptions that blind them to options. Instead, they seem to start with curiosity rather than judgment and, as a consequence, exercise objectivity, demonstrate empathy and offer well-considered advice.
Their advice is neither templated nor generic, but the processes they consistently use, and their effective use of clarifying questions, lead to consistent results.
As obvious as it may be, asking clarifying questions is the key to avoiding assumptions and automatic responses.
When we review client files, it is obvious which advisers invest significant time and resources in understanding and educating their clients. These advisers often have a more rigorous, more expansive and more empathetic discovery process and they supplement this with other processes designed to promote their clients’ understanding. These advisers don’t simply provide ‘fact sheets’ or incorporate extra paragraphs in their advice documents, instead they take substantive measures, and ask open clarifying questions, to obtain free and informed consent.
More importantly, these advisers seem to have adopted these processes out of a genuine desire to ensure that their clients understand, and appreciate, the steps they’ll need to take to achieve their goals and objectives.
- Review your meeting notes. How many questions did you ask, how many clarifying questions and what percentage of your notes are your client’s verbatim questions and comments.
- Review your advice processes or process maps to ensure their not leading to a single, inevitable outcome.
- Look at the last ten recommendations you made and identify any consistent elements and recommendations.
- Make asking clarifying questions a habit. Think about your last audit. How many clarifying questions did you ask?
- Review the pace, timing and structure of your discovery and assessment process.
- Build frequent ‘check-ins’ into your process to confirm client understanding.
- Don’t implement advice if your client can’t demonstrate that they understand and can explain your recommendations.
3. They are consciously competent
Successive Governments have sought to minimise misconduct, and prevent systemic failures, through various reforms; with the latest reforms emphasising professionalism, formal qualifications and ethics.
Their emphasis on formal qualifications and entry criteria may have the (un)anticipated consequence of reducing advisers numbers (and, logically, conduct risk), but, unfortunately, they confuse competence with qualifications.
We don’t. We are well aware of the difference and how the difference manifests in advice.
If you’re familiar with Noel Burch’s Conscious Competence Framework, you’ll understand the difference and the reason why, in our experience, the best advisers are consciously competent.
Burch’s model is premised on the idea that, when you learn and practice a new skill, you transition through these stages:
- Unconscious incompetence. You don’t know that you don’t have this skill, or that you need to learn it.
- Conscious incompetence. You know that you don’t have this skill.
- Conscious competence. You have this skill and know that you have it.
- Unconscious competence. You don’t know that you have this skill, but you’re not worried because it’s so easy to do.
The better advisers are always learning. Their files, file-notes, fact-finds and advice documents demonstrate a breadth of knowledge, and a depth of analysis, that’s often missing in most advisers’ records. For example, consciously competent advisers generally undertake more analysis and more frequently address second and third order consequences. This is particularly evident when they’re providing ‘defined scope advice’ – consciously competent advisers demonstrate a rare capacity of highlighting, in real terms, the consequences and implications of their client’s decision. More importantly, it’s the consciously competent advisers who will move outside the defined scope of the advice if, or when, they determine that it is in their client’s best interest for them to do so.
In their interactions with their clients, consciously competent advisers approach problems with a beginners mind (shoshin) and methodically work through options before even contemplating solutions or products. They’ll research, and assess, products that they’ve previously considered. They often use hand-drawn diagrams (or external general material) to highlight and explain relevant concepts. They also tend to simplify, but not over-simplify, concepts to ensure they are well understood by their client.
Incidentally, consciously competent advisers engage with their auditors differently; they tend not to debate observations but instead concentrate on specific remediation and coaching points. They’re forward looking rather than backwards-looking.
- Map your authorisations against your CPD and your product recommendations.
- Self-assess your authorisations against your confidence in those areas on a 1-10 range from “Not at all confident” to “Highly confident”. Concentrate your CPD on those areas in which you are “Not at all confident” and “Highly confident”.
- Increase your CPD target by 25% (and include teaching, psychology and reasoning topics).
- Review your last SOA and focus on the recommendations you made. Start by asking why you made those specific recommendations and how you can prove, or disprove, their appropriateness.
- Assess the advantages, consequences and implications of your recommendation for your clients’ dependants or beneficiaries.
- Embrace shoshin.