by Tony Vidler
Recently I came across an interesting graph that highlighted the fact that most consumers cannot tell a good adviser from a bad one. we have a job to do as individual advisers then in differentiating ourselves to begin with, however we also need to consider as an industry how we portray ourselves to members of the public.
Lifting technical education, and adviser qualifications, and enshrining certain terminology in law, or lifting the fiduciary standards are all excellent and necessary steps on the path to professionalism. Self-imposed improvements in education, ethics and safeguarding the reputation of an emerging profession must continue, if not accelerate.
Simultaneously however, there is another issue which is far more fundamental to how we do business.
So here is the damned good advice: we have to educate the public on what a good adviser is to begin with, because right now they clearly do not know what it is.
Apart from the alarming proportions of consumers who simply cannot tell the difference between good or bad advisers…more stunning is that despite all the regulatory changes and lifting of standards across the entire industry, consumers are actually finding it harder to tell the difference today.
Clearly the lifting of standards and regulatory standards has not made it easier for consumers as yet. I have no doubt they will do so in time, but they haven’t as yet. So the onus is upon the industry itself to help consumers get a better understanding if we want them to engage with good advisers.
So what IS a good adviser?
Most articles you google will tell you that a good adviser is someone who miraculously negates all potential conflicts of interest and divorcees themselves entirely from bias.
Does that human actually exist?
The mood of the moment globally is that the “good adviser” is one who operates to a fiduciary standard which even our lawmakers do not have to aspire to. Because it is an easy conclusion to draw, the evolving school of thought is that a good adviser is one who uses a single remuneration method – one must be 100% fee-based. In fact, going on the recent story out of the USA, it is apparently not good enough to have even less than 1% of your revenue potentially being something other than directly invoiced client fees. You have to be be totally pure….which even the Catholic Church doesn’t expect of its candidates for sainthood.
As an industry we are leaning far too heavily towards describing a good adviser simply on the grounds of their remuneration method. Sure we talk about technical competency, and professional designations and duty of care obligations too…but every discussion reverts to the mean: good = fee-based.
Well I have a financial adviser who doesn’t charge me fee’s, and I think she is very good. I am always 100% aware of what she is making from any engagement, or what she is paid for her ongoing advice and service. I am always 100% aware of her commercial relationships or areas for potential bias.
I am also 100% happy with all of this for a very simple reason:
My good adviser helps me get the results I want.
This isn’t about an investment performance result, as the adviser cannot substantially influence that in my view. Nor is it about me getting cheap insurance; in fact; my insurance is actually bloody expensive. What makes my adviser a good adviser is that she spends the time understanding what I want to achieve; is excellent at understanding where the gap is between her competencies and mine; is willing to say the things that need to be said (whether I want to hear them or not); and she remains utterly objective and focussed on my goals, not hers.
A good adviser is in fact a good coach.
A good adviser helps me get the results…the adviser doesn’t actually get the results at all. The adviser helps me work what actions are required for me to take that will most likely lead to the outcomes I want. At the end of the day…I actually have to do the stuff. I have to play the game. The coach’s job is to maintain a strategic overview of the game, and then deliver the plan that will get me the win.
As an industry we perhaps need to begin thinking about explaining our purpose, competencies and functions in coaching terms. The adviser’s designations, remuneration models, business affiliations and philosophies are indeed points of differentiation from other advisers. It is appropriate to assess hiring an adviser after taking such things into consideration, as different consumers will place different emphasis upon these factors….though over-riding everything is the customers level of trust in the individual adviser.
Perhaps the best way to highlight whether an adviser is good or bad is to focus therefore on two core issues that go to the heart of what most consumers are wanting:
1. Demonstrable trust (that is; behaviour and actions which reinforce a customers assessment of trustworthiness)
2. The coaching skills of advisers
Good financial advisers create positive changes in client lives because of their coaching skills, and because clients can trust them with their dreams.
That is a story worth telling, and one which the public at large is willing to listen to.
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