What questions are you most often asked?

Financial planning is a fairly simple concept. There, I’ve said it! It is at least in the eyes of clients, who consider it broadly as sorting out their money stuff. Of course, effective financial planning is anything but simple. It takes a lot of expertise, talent and a really good process to transform the financial lives of your clients.

Towards the end of last year, FT Money carried out a piece of research among 300 UK clients of financial advisers, with the aim of uncovering their most common questions and the solutions that advisers are offering. The survey results were quite insightful and would likely be relatively similar if carried out in Ireland.

For a start, the top 10 issues that clients want to discuss with their advisers are in the following areas,

  • Retirement/pension planning
  • Tax planning
  • Brexit/political uncertainty
  • Inheritance tax
  • Future financial planning
  • Investment returns/dividends
  • Portfolio review/diversification
  • Global politics/likelihood of market crash
  • Pension drawdown
  • Pension transfer

Maybe no great surprises in the above? It is interesting though that there is nothing directly relating to protection of wealth in there – does financial security fade into the background during times of economic growth?

However, there were four questions that featured frequently in the concerns of clients – do they reflect the conversations that you are having with your clients?

 

Can I afford to retire?

This was the number one question that FT readers wanted to discuss with an adviser, with more than 20 per cent of respondents naming retirement and pension planning as their top concern. With state pensions providing only basic subsistence support to people, clients are rightly focused on how they will live when their income earning days are behind them. Retirement planning is a critical element of financial planning today through both the accumulation and decumulation phases of life. No surprises here!

 

How can I pay less tax?

Tax planning was cited by over 17 per cent of readers as a topic they wanted to discuss with a financial adviser. Many financial planners today are expert in tax matters and indeed many of you have additional taxation specific qualifications. This all makes a huge amount of sense as tax is a significant drag on wealth accumulation and good tax advice has a huge impact. Being a personal tax expert is a necessary requirement for advisers today.

This is an area of potential improvement for some advisers. Do you shy away from giving tax advice and guide your clients towards an accountant or tax adviser? Is this always the right approach? Can you really give expert financial planning advice without being a personal tax expert? I’m not so sure…

 

How can I reduce the impact of inheritance tax?

In addition to general concerns about tax, inheritance tax (IHT) was also a key, specific concern for readers. Although only 5 per cent of estates nationally (in UK) pay the tax, many readers nevertheless fear the impact of IHT — and need an adviser’s help to understand the system.

Of course you are all aware of how penal the Irish IHT system is, with thresholds slashed since the economic crash and IHT rates increased. When you layer increased wealth over the last decade and the recovery of property values, IHT can take a big chunk out of estates. There are ways of reducing these tax bills – you play a really valuable role in helping your clients to take advantage of them.

 

How will Brexit impact my finances?

Obviously this topic is not going to be of such concern to Irish clients. What it does demonstrate though is that clients rightly worry about significant external events beyond their control. One of the most important roles for you as a financial planner is to reassure clients and to keep them focused on the plan. You are all aware that irrational behaviour by investors is often the single biggest drag on growing wealth. You are the voice of reason, helping clients to keep a long-term perspective.

 

While these may be the most common questions that clients ask, one important point comes to the surface. The questions that clients have are about themselves and their money, not about the products that they hold. This further confirms the value that you add is as an expert financial guide… and not as someone who chooses the best products and times the markets.

Are you ready to answer the big questions of your clients?

How good are your review meetings?

As more and more advisers shift the focus in their client interactions away from products and more towards a broader and more valuable financial planning proposition, the profile of their income is also shifting from a reliance on initial commissions to a flatter and ultimately more valuable ongoing income stream. To justify this recurring income stream, regular review meetings with clients are becoming far more important events.

It’s not too long ago that I used to wince when hearing about the review meetings of some advisers, where the client opting not to have a meeting was seen as a victory. The review meetings of these advisers were haphazard and added little value to clients. Thankfully these are mostly in the past.

One of the challenges for advisers is that they hear so much about the importance of developing an engaging Client Value Proposition. As a result, a lot of time and effort has gone into identifying where clients are experiencing value, the advice process that is being used, the client services that are provided and indeed how all of this should be paid for by clients. This is great, but the focus tends to be around the initial (year 1) engagement with clients.

I can tell you as the client of a financial planner that I can’t at this stage remember our initial interaction. But I remember clearly our last review meeting, and I’m also very clear about what we will discuss at our next meeting. And that’s the way it should be. The initial advice stage set me off on the right path; the review meetings keep me on it.

With some advisers, the focus is heavily weighted on attracting new clients, at the expense of minding the existing ones.  However having a brilliant review meeting is the means by which you’ll lock in those clients year after year, and as a result enjoy an ongoing income stream from the clients.

As a core part of your initial engagement with a new client, it makes sense to explain to them in detail what will happen every year into the future. It’s not enough for review meetings to be positioned as a “by the way” 10-second conversation at the end of the initial product implementation.

What should a review meeting include? Of course the financial plan should be central to the meeting – have the client’s life goals changed, do they want to explore a different future? Have they the financial capacity to live the life they want? There is also the fairly standard (and necessary) tasks of reviewing a client’s portfolio, getting up to date values and potentially even writing a short review report. And you definitely should explore further protection needs based on changing circumstances etc.

However the real opportunity to demonstrate your value on an ongoing basis to clients rests outside of the traditional review meeting agenda. Why not take a little extra time and set out for your clients some financial benefits that you’ve delivered to them such as;

  • Their wealth growth.
  • Their improved future capability to live the life they want.
  • The growth in actual euros of their investment portfolio.
  • The tax saved as a result of their pension plan and any other tax efficient policies in actual euros.
  • The actual money saved in euros as a result of a protection review you carried out previously.

Now your ongoing fee / trail commission starts to look very small! However there’s still a lot more you can do at these review meetings to demonstrate further value to you clients.

  • Help your clients with their household budgeting. This is an area that many clients continue to struggle with. By getting clients on the right path here and reviewing it with them, you can add enormous value to them.
  • Reviewing future cashflow plans with your clients each year adds tremendous value. This can completely change the conversation, enable you to look at “what if” scenarios and approach the client’s financial affairs in a very engaging and collaborative way.
  • Talk to them about their broader financial needs where you don’t provide the solutions. You can add value by tapping them into your network of solicitors (for their will or enduring power of attorney), tax advisers (tax advice) or accountants. Now you’re the person centred right at the hub of their financial affairs.

Review meetings are also the opportunity to remind your clients of the work and interactions you’ve had with them throughout the year – the rebalancing of their portfolio that you carried out, the interim meetings you had, seminars you invited them to, the content you sent them etc. How can a client question your ongoing fees when they realise that you are actually providing value to them right throughout the year?

So place review meetings at the heart of your proposition. Make them memorable and ensure your clients come back to you year after year.