Client education: The key to advice excellence

Brett Davidson of FP Advance explains why educating clients on their financial needs can improve relationships and help your business run more effectively.

Sometimes it is easy to forget what business you are in, what with the amount of compliance driven change that seems to be coming through from the FSA. The RDR and more recently the thematic review of the wrap space also seem to be causing quite a stir.

When you haven’t quite got your proposition sorted out in the first place this barrage of new requirements can really throw you off the scent. But it is critical to remember what you really do for clients and it is not managing their money or picking funds. The core business of financial advisers is advice and done well it answers the big questions for clients:

• Where am I now?
• Where do I want to be?
• How do I get there?

The really great advisers can fit into any or all of the three core roles demanded of them by clients, that of strategist, scorekeeper or sounding board.

The strategist role provides the ‘how to’; how to get things to work in a way that achieves the client’s major life goals and objectives.

The scorekeeper role keeps the score to ensure that everything is actually performing the way it was expected to at the strategy stage.

And the sounding board role provides excellent listening skills that allow the client to explain and explore their own ideas around what they want.

Knowledgeable clients

However, the common thread that runs through all of these roles is education. A high quality, long-term client relationship is one where over time clients become more educated about what it is they want and how best to achieve it. While they may never become experts like you, good clients definitely become better educated over time and better educated clients are easier to work with.

Clients come in, often with partial or incomplete knowledge of issues around investing, pensions, tax etc. How often have you heard from a business owner that they don’t believe in pensions and their business is their pension fund? Yet after some education around what a pension actually is and some of the benefits, these same clients can happily purchase their factory or office floor and own it via a pension structure.

Great advisers never miss an opportunity to provide a little more education to clients because they understand that clients don’t ‘get it’ immediately after the first meeting. So their whole ongoing service proposition revolves around continuous client education. In the very best financial planning and wealth management firms client education becomes the centrepiece of the ongoing relationship. After the initial work is done the great advisers have a systematic review process that provides a range of meetings, seminars and communications all aimed at continually keeping the client informed but also educating them and reminding them about core financial planning principles.

Review meetings are used to remind clients why asset allocation and diversification are so important. Seminars are used to remind clients about important strategic issues like good debt and bad debt, pensions vs. other investment structures, and the pros and cons of any approach. Client emails and newsletters are targeted specifically at issues clients need more knowledge of, like the real cost of investing, the magic of compound interest, or the need to remain invested through all market conditions.

Education is the foundation of good ongoing client management. Poor advisers simply send investment reports, while great advisers not only provide information but education and context for their clients around what that investment performance means for their plans and objectives. They also realise it is completely within their control to structure these educational opportunities throughout the year by creating a strong internal service standard for each client segment.

Be proactive about education

For education to be at the core of your offering it needs to be proactive throughout the year as well as reactive when sitting in front of a client at review time. The last 12-18 months has highlighted this issue dramatically. Many advisers did not proactively contact their clients when the world fell off a cliff in October 2008, which seems unthinkable when you consider this recession and market correction have been discussed as a once-in-a-century event. A legitimate question from your clients might be: “How bad would it have to get for you to pick up the phone, or send an email or formal newsletter providing me with more information around what is happening?” At times like these poor advisers go silent which is exactly what clients do not want.

Client education is at the heart of a great advice business and you don’t need to provide the latest investment idea or creative tax strategy every time you communicate with clients. Reminding them of the basics and keeping them grounded when times get a bit crazy will all be valued highly by your clients when the madness passes. Not only that, it makes running your business easier too because you can just tell people the truth.