Hannes van den Berg, Chief Executive Officer of Momentum Consult
As financial advisers you’re at the coalface of the industry. Even though you project a strong, confident energy when you deal with clients you also have fears and anxiety to deal with.
But the good news is, these concerns can be addressed and, if dealt with correctly, can even act as opportunities to renew and reimagine your business.
Events like pay cuts, layoffs and crashing markets aren’t within your control. But what you can control is staying in touch with your clients, keeping them up to date with the latest information from the markets and from product providers, and keeping them calm when every cell in their brain is yelling at them to do the opposite.
Financial advisers are directly impacted by any adverse rational or irrational decision made by their clients
COVID-19 and its impact on our economy has meant there is a lot more to deal with and challenges are coming at you from all directions, including:
- A significant increase in servicing demands from clients
- Lapses, paid-ups, surrenders resulting in the clawback/decrease of commission
- Decrease in advice/ongoing fees, as a result of lower asset values
- Cancellation of advice/ongoing fees, should clients cancel their relationship with the adviser
- Significant decrease in new business volumes
- Increase in Personal Indemnity claims and Ombud complaints from clients against the FSP and financial adviser for perceived incorrect/bad advice
- New-to-industry advisers, as well as advisers depending on substantial upfront commission will find it particularly tough and might potentially question the sustainability of their advice practice
It’s not just about income…there are emotional challenges too
As a financial adviser you have an inherent vested interest in and relationship with your clients – their success is your passion and purpose. When you see your clients struggling, when you hear the uncertainty in their voice or read their panicked questions in an email, it affects you emotionally during a time when the general psyche of our communities is already struggling with what is going on around us. As an adviser you are part of a client’s journey to success, and when they falter on this journey you can’t help but feel a sense of responsibility in helping them get back on track.
The remedy: Evolving your relationship with clients
I’m a big believer in the power of financial advice and how dynamic the role of an adviser is. You aren’t sales people, you aren’t just there to advise clients on financial matters. You are confidants, coaches and even become family friends. That is why, especially during a time like this, it’s important to switch things up and change your perspective on what you do. Now is the time to assist clients to navigate the current economy and act as a financial coach as opposed to filling a traditional product advice and sales role.
While this won’t solve all the challenges, it will go a long way in assuring clients that you are there for them – and WHY you are there for them – to help mitigate any rational or irrational decisions they might make. The power of the human spirit, of human relationships, has never been more evident than it is now and you hold that power in your hands. Things will recover, the sun will shine again. Until then, it is up to you to make sure the decisions they make today and ensure a positive, financially stable tomorrow.
So what are your clients worried about and how can you help them
The local economy is facing a wave of change as the affordability of premiums, the cash flow requirements and annual draw-down rate of living annuities, and the impact of policies serving as security (cessions) is called into question. Businesses are reconsidering their staff benefits and their short-term insurance on assets. All of this, paired with factors like pay cuts, layoffs and crashing markets are leading some clients down a dangerous path.
Emotional decisions: short-term comfort, long-term side-effects
In difficult times, clients potentially act irrationally and make emotional decisions without thinking ahead. We’re all human and we’re in a situation unlike any we’ve experienced before. Market uncertainty and economic factors have always been there, but it seems that the traditional fears clients have are amplified by what is happening around them.
Without proper consultation with their financial adviser, or in contradiction to the advice given by the financial adviser, clients can make decisions that might seem like a good idea over the short term, but can have devastating consequences over the long term. These include:
- An ungrounded decrease in equity exposure (switch to money market/cash solutions)
- Withdrawal of investments from the market
- Reducing or stop paying premiums
- Request for premium holidays, make policies paid-ups, or request surrenders
- Cancellations of products and/or benefits
- Question and challenge the quality and appropriateness of advice provided
- Switch from one financial adviser to another
- Fraudulent claims to try and gain financially
By understanding client behaviour and their expectations you can be in a stronger position to mitigate these challenges and give them the guidance and answers they truly need.
What your clients need (and want) to know
To differentiate yourself as their trusted partner, you need to help them make the best long-term, outcomes-based decisions. This can be done by helping them understand:
- How to design, implement and stick to a long-term financial plan
- What to consider when making changes to their personal financial position and the impact thereof on their financial plan
- What steps to take when reconsidering their budget so they can adapt their behaviour and financial plan accordingly
- Considering a permanent change in their buying and spending patterns.
The client checklist: Do you offer what they’re looking for?
The relationship a client has with their financial adviser should be grounded in vested, mutual trust and the client’s financial outcomes – just like the type of trusting relationship they have with other professionals like their attorney, accountant and physician.
Here are some examples of what clients are looking for in their relationship with you – not just during lockdown and COVID-19 but going forward too.
- A registered, highly qualified and reputable financial adviser that is preferably part of an established financial planning and advice firm.
- An adviser that gives them and their family peace of mind.
- An adviser that listens and makes it easy for the client to articulate and understand their needs, fears, financial position and dreams.
- An adviser that can draft a long-term financial plan and execute the required objectives through an array of approved products and product suppliers.
- An adviser that is prepared and capable to help them navigate every step of their financial journey with them.
If there are items on this list that you’re unsure about or have no idea how to achieve them, chat to a mentor in your industry or at your financial advice firm for guidance.
Remember: in a consumer-first economy, clients are firmly in the driving seat and are more empowered than ever when it comes to shifting their preference and loyalty for a specific institution or adviser
All the expertise, products and service to help you to keep your clients focused on the destination.
Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.