Why Advisers Need to Take The Lead On Providing Financial Literacy
Best Practice Advice & Sales & Marketing for Professional Services

Why Advisers Need to Take The Lead On Providing Financial Literacy

October 19, 2015

by Tony Vidler

There is an increasing rush to provide Robo-offerings from institutions and an increasing amount of angst from advisers wondering how to combat it.

The way to combat it is for us – the advisory side of the business – to educate consumers.

WE, the advisers, need to take responsibility for providing financial literacy as it is in our best interests to do so, and it is the element which will generate demand for advice rather than just product solutions.

Consumers take greater responsibility for their own well-being when they have the knowledge and confidence to make good decisions.  They tend to become more aspirational as they see plans come to fruition, and they accumulate personal net worth.  With increasing aspirations comes the need for more strategic advice, or more specialist strategies.

WE need to take charge of providing financial literacy because it is a primary driver of generating future advice clients in other words.  Frankly we can’t really rely upon the bureaucrats to do it terribly well from what I have seen over the years.  They come into the market far too late, and with far too little.  They also pitch far too much of their effort into the no-man’s land where limited literacy and low aspirations interact with simple needs.

(a copy of the graphic can be dowloaded here)

When we think about how or where financial literacy of consumers intersects with their requirements it becomes apparent that there is a place for a variety of business models, including robo-advice.  Those consumers with limited understanding, or just simple needs that can be relatively easily met with an off-the-shelf product solution, are prime candidates for a model that provides convenience, simplicity and low cost.  Robo-advice models will meet most needs here.

However there are also consumers who need only product solutions at certain points (or for particular problems) in their lives, and have the financial competency to be able to make sound strategic decisions in reasonably complex areas.  The “brokerage” model is ideal for those consumers as it is a personalised but largely transactional service which tends to deal in locating ideal product suites for complex problems once the consumer has largely identified their own need.

Of course for those consumers who are competent, though perhaps not confident, and who have reasonably complex financial lives there is a requirement for more strategic advice services, whether they be of a general or specialised nature.  The complexity in their lives often leads to the need for plans linking product, taxation, advice, legal structure, and mixing business and personal financial needs.

The critical element therefore in moving consumers beyond simple low-cost product solutions is empowering them to have a better understanding of their own possibilities, together with a recognition of the types of different advice components that can provide meaningful value.  That means educating more consumers.

The good news for advisers is that with the abundance of low-cost communications mediums in the form of social media, blogging, newsletters and increasingly specialised publication services, we have no significant barriers to producing, publishing and distributing empowering content for the consumers we wish to engage with.  The even BETTER news for advisers is that consumers are wanting more education and quality content, so there is a convergence of demand and the supply capability.

Whether enough advisers take advantage of the convergence remains to be seen, however I am convinced that the ability for advisers to generate future clients from todays increasingly discerning consumers is through taking the lead on providing financial literacy.  Delivering quality content that educates and empowers consumers will lift their knowledge levels and decision-making abilities, and more consumers will see the need for more strategic or more specialised advice services.

You may also find this post useful: Robo-Advice has as much chance of catching on as Online Dating does

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