Johan Gouws, Head of Wealth Advisory at PPS, shares his perspectives in this exclusive Q&A, exploring the evolving role of financial advisers, the impact of behavioural finance, and the future of personalised wealth management.
How has the role of financial advisers evolved beyond traditional product recommendations?
The world of personal financial advice has made a great shift from a more sales-driven approach to an advice-led approach. These changes were driven by updated financial services regulations, advancements in information technology and social media, as well as a more informed financial consumer who has greater access to financial information. With the professionalisation of the financial advisory services industry came the first wave of more holistic financial planning, which involved the areas of insurance, investments and fiduciary. Another wave followed when the concept of behaviour-based planning was introduced. The continued development of the field of behavioural finance has resulted in a more personalised approach to financial planning.
What key behavioural factors are now influencing the financial advice process?
Social media has become an increasingly influencing factor in consumers’ financial behaviour. This includes the type of lifestyles people want to live, what success looks like and the daily noise of markets that can cause feelings of fear, uncertainty and anxiety. The conflict between what people want versus what they need when it comes to lifestyle choices is making long-term planning for retirement a greater challenge. People are battling with their financial priorities in a world that is giving them a false sense of what success, wealth and security are about. The daily avalanche of socio-political developments, corporate news and market movements are putting investors’ emotions on a roller coaster, making it a great challenge to stick to their financial plans. In addition to these behavioural challenges, financial consumers are often influenced by common biases like herd mentality, overconfidence, loss aversion and anchoring, which impact their financial decisions. Making financial consumers aware of how their emotions and cognitive biases can influence their choices will enable them to stick to their long-term financial plans and investment strategies.
How does an understanding of client behaviour shape product design and the overall client journey?
Understanding financial consumers’ main cognitive and emotional trigger points and responses can assist product providers and financial advisers in crafting more relevant solutions and bespoke financial plans. This includes elements such as the level of complexity, potential volatility and pricing in the design of financial solutions and available information on an ongoing basis about the performance of the solution. More tailored risk and investment solutions enable financial advisers to create customised plans that not only align with the client’s financial objectives but also address their cognitive and emotional needs.
Cutting-edge technology to grow & adapt with you
PROFIDA will meet your needs, both now & on our journey together into the future
Can you share examples where behavioural insights have led to improved client outcomes in financial planning or insurance?
The issue of the risk tolerance of investors has been a source of contention for many. Only asking the question of how much investment risk a client can tolerate is the incorrect question to ask as it ignores the financial outcome that needs to be achieved. To achieve a specific investment outcome, it is necessary to take sufficient investment risk. This is where the ability of an investor to save and the investment time frame comes to mind. Considering these elements leads to the more appropriate question of how much investment risk is required and can be tolerated. Helping investors understand the importance of taking enough risk, the power of compounding, and how time spreads risk can make them more comfortable with risk-taking. This allows the adviser to take an outcomes-based approach to financial planning, rather than focusing solely on risk, which may not achieve the client’s desired financial goals.
What role do insurtech and fintech play in enhancing personalised advice and client engagement?
Technology not only helps advisers to collect and analyse the most relevant data but also to model various financial outcomes and affordability based on the client’s preferences. It allows the adviser to be more efficient in advising and servicing their clients and to serve them in a more personalised way. Insurtech and fintech also allow the financial consumer to use self-help options providing greater flexibility to their required service needs.
In what ways are data analytics and AI helping advisers predict and respond to client needs more effectively?
Having access to relevant and quality data is a critical element for being able to design bespoke and effective investment solutions and plans for financial consumers. Artificial intelligence (AI) should be viewed by the adviser as augmented intelligence that compliments their unique human skills in meeting the psychological and financial needs of the client. AI can help advisers create more realistic financial plans by modelling different scenarios based on the client’s preferences and past market trends, making the plans easier for clients to understand and relate to. It also facilitates the ongoing monitoring of the success and progress made in achieving the client’s financial objectives and making timely adjustments to the financial plan as and when required.
How has the management of risk changed with the shift towards a more holistic approach to advice?
In applying a more holistic approach to financial planning, the financial adviser can better balance the various risks the client may be facing. This is achieved by considering the client’s life-stage-specific needs and ensuring that the various risks are addressed within the client’s scope of financial means. Having too much insurance but not saving enough for retirement can create future risks, such as outliving one’s savings and running out of money in retirement. By continually reassessing the client’s life-stage-specific needs, the necessary adjustments can be made to keep the various financial risks in balance.
What strategies can advisers implement to guide clients towards long-term financial security and risk mitigation?
Advisers should apply an outcomes-based advice approach by starting with the end in mind. This provides the client with a clear picture of the financial goal that needs to be worked towards. Knowing how much capital needs to be saved up for financial independence during retirement and how much time is available to achieve this goal provides a sound base from which to do long-term planning. These long-term objectives and the savings required to meet them need to be balanced with the more immediate risk needs like death, disability, critical illness and income protection based on the client’s life stage, preferences and available financial resources.
Social media is reshaping financial behaviour, influencing perceptions of success, wealth, and security, often leading to unrealistic financial expectations.
What exciting developments in financial advice and risk management should professionals keep an eye on?
The most exciting development for the financial services and advice industry is the possibilities that the advancement of technology and the use of AI as an enabler offers advisers and clients. Advisers need to focus more on how technology and AI can enhance the way they provide advice –making it both highly personalised and efficient – from crafting tailored financial plans to implementing them and supporting their clients. Technology can be used to service more clients in a way that suits their needs and preferences. The necessary balance should, however, be found for each client in terms of providing personalised versus technology-enabled service and advice based on their literacy level and comfort when it comes to technology.
PREMIUM COLLECTIONS MADE SIMPLE
- User friendly collections System
- Dedicated service consultant
- Collect directly into Insurer Bank Accounts
- Wide variety of reporting services
Take the admin out of your premium collections
An authorised Financial Services Provider – FSP 50552
How do you see the relationship between advisers and clients evolving in the next five years?
The relationship between advisers and their clients will continue to be shaped by various elements. The expected introduction of the Conduct of Financial Institutions (COFI) Bill will provide greater protection for the financial consumer and create a stronger framework within which financial products and services are delivered, and advice is provided. Greater consumer awareness and improving financial literacy levels will require advisers to have sound and strong technical knowledge when it comes to providing advice. Technology will open the possibilities in terms of service models and the level of personal interaction between the client and the adviser. A more wellness-orientated approach to life by consumers will require that the adviser becomes more of a life coach who is also able to speak to the lifestyle, health and generational planning elements of a broader life plan for their clients.
As the financial landscape continues to evolve, the role of advisers is becoming more dynamic, balancing technical expertise with behavioural understanding and technology-driven solutions. Johan Gouws’ expertise highlights the importance of a personalised, outcomes-based approach to financial planning—one that empowers clients to navigate uncertainty and achieve long-term financial security.