Earlier this month I had the pleasure of working with some of the leading financial advice firms in United Arab Emirates over the course of a couple of days in Dubai (the photo is of the VERY impressive Burj Khalifa – the tallest building in the world today). My involvement came about as part of a brilliant programme developed by Zurich International Life to help advisers in UAE prepare for some major changes that will impact their market, probably in the not too distant future.
The Insurance Authority in UAE has flagged some substantial regulatory changes, of which the final details and dates are yet to be clarified. However all the consultation papers to date point to significant reductions in commission levels on products sold and restrictions on indemnity terms that can be offered, along with a number of other changes. The changes will result in better outcomes for consumers, however the changes also create enormous challenges for advisers.
So what has all this to do with Future Cashflow Planning, I hear you ask? Well advisers in UAE are looking at a possible drop of more than 50% of revenue when the regulations come in. It is a market where advisers today are largely remunerated by commission only, and the impact of the regulations mean that relying purely on product sales in the future will see advisers simply be paid less for the same amount of work. They really have two choices,
1. Write double the amount of business they’ve been doing to date or
2. Broaden their proposition beyond products, add more value to customers and charge accordingly.
The second option looks far more appealing to me.
What might this proposition look like?
Advisers in UAE are fortunate that they can look at other markets around the world that have transformed in recent years. If they look at USA, Australia, New Zealand, UK, Holland and of course here in Ireland, they will see a common trend. That trend is towards progressive advisers providing a lifetime financial planning service, where the client’s lifestyle aspirations for their whole life are identified, and then a financial plan is developed to enable the client to achieve that desired lifestyle.
Sitting at the heart of this is Future Cashflow Planning, giving the client a snapshot of their financial capability for every year of their life and enabling the adviser to answer those big questions for the client,
• Are we always going to be ok?
• Will we have enough money to live the life we want?
• Can I stop working today?
Offering this deeper and richer proposition to clients will potentially enable advisers in UAE to charge for their expertise along with / instead of charging for the products that they arrange. This has certainly been the trend in other markets. While of course this deeper and richer client proposition will not be appealing to every client, there is a large cohort of clients in every market to whom this service will appeal.
It’s not all about regulations though…
In Ireland it wasn’t regulatory change that heralded the growth of lifetime financial planning and the use of future cashflow software. Instead it was as a result of ambitious advisers watching the trends in other markets (particularly the UK) and seeing how the leading advice firms in those markets had extended their proposition into lifetime financial planning. It was clear that this deeper and richer client proposition results in a far more engaging and valuable service for clients.
Lifetime financial planning, built on the foundation of a future cashflow plan has been the single biggest shift in the advice market in Ireland (and these other markets) for quite a long number of years. It has redefined the value offered by financial advisers, and has enabled them to really establish themselves as a trusted professional in the eyes of their clients.
And in Ireland, the rewards have followed for advisers. They enjoy more valued and durable relationships with their clients, who are happy to pay for this advice year after year. Whether this is paid by fee, retainer or trail commission is not really the point – these are all simply methods of payment. The key point is that clients are willing to pay for advice year after year, irrespective of whether product transactions happen or not.
That has to be good news for advisers further afield, such as those advisers in UAE who are facing regulatory change. Commission reductions on products are of course a challenge. But the opportunity is there to broaden the client proposition, add enormous value to clients through the provision of lifetime financial planning and charge accordingly for this.
Image Courtesy Flickr – Tom Sespene – wajortom34