What will be different after Covid for your financial planning business?

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OK, so we’re all still in lockdown but this time it is very different – the end is in sight. Most conversations are hopeful about this being the final lockdown and that is something no-one felt confident about before. Now that we all see the vaccine rollout gathering pace and assuming there are no major calamities here, we can expect life to return to normal at some stage in 2021.

But what will “back to normal” mean for your business? While of course it will mean meeting your clients face-to-face again, businesses have changed forever. And this is a good thing! Set out below are 5 ways in which your financial planning business can emerge stronger from the Covid era.

 

Be braver with technology

The most obvious example is that for years we had the ability to hold remote meetings, but these were only really carried out in large, international organisations. We all knew about them and some even speculated about using them one day… and then suddenly we were all using remote meetings every single day. Even though many people thought that clients would never adapt, most clients did, and now embrace the convenience of these meetings.

We see other examples in financial planning businesses quickly leveraging the advantages of cloud computing, team collaboration software and the introduction and acceptance of digital signatures.

Each of these on their own would have been a major project in years gone by, but because you needed to quickly adapt, they became an everyday part of your business within a few short months. Hopefully as further new, clever technology solutions emerge, we’ll all procrastinate a bit less and be brave – maybe we’ll all become a tribe of early adopters?

 

Be more flexible with your people

I think it will be a minority of financial planning businesses that will close their offices, with everyone working remotely. However we are likely to see a continuing demand for hybrid working conditions, where people are working part-time in the office and part-time at home. This is going to gather further pace as legislation is on the way to support this model too.

What we’ve seen in the last year is that with the proper conditions and commitment of both the employer and employee, remote working can be very effective. Even where employers instinctively like to see their team around them in the office, they will need to be more open than before to remote working playing some role in the working week. At least everyone has “road tested” this now, and has seen what is needed to make it work.

This will never be for everyone – some people can’t wait to get back to the office full-time as their home environments are just not conducive to effective working, or they miss the sociability of the office. The key will be flexibility on everyone’s part – the employer embracing change and the employee demonstrating that they are at least as efficient when working remotely.

 

Outsource, outsource, outsource

With less people in the office, the questions will arise as to whether you need to retain all skills in-house, or whether part-time roles can be replaced with outsourced solutions. There has been and will continue to be a growing shift towards outsourcing some part-time tasks, rather than incurring the expense of employing someone. Areas that come to mind include financial management / accounting functions, marketing, compliance, HR and technology. Financial planning businesses will consist mainly of a leadership team, planners / advisers and customer support staff including paraplanners in some cases. All other functions will be outsourced, allowing the team to retain a laser-like focus on your customers, with external people delivering your required central support services.

 

Communicate relentlessly

This is an area in which we’ve seen winners and losers during the pandemic. Some firms have gone quiet, have treaded water and are looking to get out the other side of the current restrictions and get back to the old ways of doing business. Others have recognised their physical distance from clients and have done everything in your power to stay as close to them as possible. Email communication, social media, webinars, zoom meetings and phone calls have been planned and carried out relentlessly. These firms have seen the power of these communications in more engaged and indeed grateful clients, and will continue with this approach into the future.

 

Think about business continuity

This is the “what if” planning. Before 2020, who had planned for a pandemic hitting? Who even had plans for being unable to access the office for any reason? I suspect very few of us had such plans…

But now we’ve seen the need to be prepared for the unexpected. While business continuity is an important element of ongoing planning in most large businesses, it really doesn’t feature in smaller businesses. Now maybe it should, to a level that makes sense. Get the team thinking about a range of unlikely scenarios and what you would do if they happened – it’s always better to have a plan and a process to implement, as opposed to thinking while under severe pressure. Scenarios might include the loss of the office, the loss of key people, a security breach, a data loss, a PR disaster etc. Think of the unexpected, and have a plan.

 

2020 probably taught us all more in one year than in many years before it, in terms of our adaptability and our resilience. These are the skills to bring forward with us as we emerge from the Covid era.

Will 2021 be better for advisers?

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2020 has been a year like no other. It has created unexpected and unique challenges for financial advisers in terms of the daily running of your business, interacting with clients and growing your business. There was no clue coming into 2020 that it was going to be a year less ordinary…

In looking at the prospects for 2021, I had a number of conversations with advisers about their outlook and prospects for the year ahead. These were hearteningly positive conversations, most advisers that I spoke to are very optimistic about 2021. This optimism is based on a number of factors.

 

There’s bound to be less upheaval…

Of course there is no guarantee of this, but if we have an event as significant for the whole world as covid-19, we can probably all throw our hats at it! We are in the midst of a once in a generation event… and advisers are still standing. In fact many report that their income has not been particularly badly impacted in 2020, a good place to be as we survey the decimation of the economy as a whole.

It’s important to remember though that this is not just down to good fortune, it is also an outcome of your planned and well-executed shift in income model away from upfront commission towards a recurring income basis.

And let’s not forget that finally it looks like there are effective vaccines on the way.

 

Your investment advice is well placed

Most of you consistently guide your clients away from trying to time markets and avoiding making short-term investment decisions. If ever this advice was put to the test, this was the year. A 34% drop in markets as a result of covid and huge uncertainty around the US elections certainly tested the mettle of investors. Telling your clients to stick to the plan and avoid short-term noise paid off in spades. Markets were up 60% from their low point in March to mid-November and staying invested through the US elections resulted in a 9% gain over the following two weeks. Those investors who baled into cash at the low points will rue those expensive decisions.

As we enter 2021 and we see the uncertainty arising over Brexit, what will your advice be now? I know what I plan on doing with my investments… I won’t touch them or even look at them again for a few months.

 

Clients will need your help more than ever

There are a lot of people very badly impacted by covid. They have had a very difficult year and their businesses have been severely impacted, for many their doors have been shut. Some will never reopen or fully recover. For these people, their financial plans are very compromised, and a lot of careful thought and expert guidance is needed in relation to investment and retirement plans. Your calming wisdom and experience is needed now more than ever.

Your clients need help in revising their plans, looking at different scenarios and resetting some of their expectations for the future. They need your honest appraisal of their situation and your best advice – no matter how hard this may be for them to hear. And then you can help them plot the best route forward and build back their confidence in their financial future.

 

Your processes have likely improved

One of the big advantages of the sudden shift to remote working earlier this year was the need to very quickly develop new and smoother business practices. One year ago, how many of you were able to effectively carry out meetings online, use digital signatures and share files and workflows with colleagues via the cloud? Also so many of you are now so much further along in terms of using social media, communicating more regularly with existing clients and actually delivering an enhanced client proposition. Your business is operationally stronger going into 2021 than you were entering this current year.

 

You’ve an alternative way of working

This time last year, very few were thinking about ever working remotely. Now we’re all experts in it! Some of you love the flexibility it offers, and the commuting time saved. For many it has resulted in a much better work/life balance. Many of you will retain it on a part-time basis in the future, even when a full return to the office is possible.

While it definitely suits some people better than others, at least now everyone knows it is possible and knows what is needed to work effectively at home.  At the very least, it’s an additional work option for you going forwards.

 

2020 is almost done, it was a year like no other, but ultimately was not too damaging for many financial advisers. All of the signs point to a calmer 2021 that offers great potential for you.

When times are tough… kiss frogs

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These are tough times for advisers at the moment. Yes, your businesses are more resilient than most, mainly down to your efforts in recent years in building up a strong recurring income stream. But this still doesn’t fully compensate for the slowdown in new business that many of you are experiencing.

I know from recent conversations that some of you are finding it difficult to stay positive as prospective clients (and some of you yourselves) are slow to re-engage in face-to-face meetings on the back of Covid-19 concerns. After all, it can be difficult to pin prospects down at the best of times! Unfortunately I have to admit that I’ve seen a few advisers’ heads go down in the last few weeks….

So, it’s time for a collective pick-me-up. Here are a few thoughts to help get you going again.

 

Set yourself achievable daily goals

So the goals you set at the beginning of the year of seeing two clients every day are gone by the board. That’s ok, times have changed and you had no control of the change. But you can now re-frame your goals.

Don’t keep looking at how far you’re falling short of your turnover / recurring income target for 2020. Instead focus your effort and goals on the process, rather than the outcome. Set clear daily goals for yourself that are based on activity. We all know that as sure as night follows day, positive outcomes follow increased activity levels. Your goals might be,

  • The number of prospects you will reach out to
  • The number of existing clients you will phone
  • The number of relationship “just checking in” emails you will send
  • The blog post / social media activity you will carry out

 

Celebrate small wins

Don’t beat yourself up because you’re not writing €x,000 in new business every week. Instead celebrate your smaller wins – the number of positive client conversations you’ve had, the thank-you responses to your relationship emails. While on their own these might not seem to account for much, in time as the economy gets back to normal these clients will remember your support during the tough days.

 

Call in favours

Everyone knows that lots of small businesses are finding it tough at the moment. As a profession, financial advisers have always and consistently shown their spirit of community and helping nature. You tend to be good for an introduction, a referral, a client testimonial for one your suppliers and if you can help someone, you tend to do so.

Now it’s your turn. You need a little help, so ask for it. It might be for a referral, it might be for a testimonial for your website. Ask and you will generally receive.

 

Kiss the frogs

I learned this one from a friend of mine (you know who you are!) a few years ago. He was out of work for a while and his head never went down, even though the economic environment was tough at the time. When meeting him for (yet another) coffee, he told me about the number of meetings he had in the diary that week, just catching up with contacts. I remember saying how impressed I was that he was so active in staying out there at such a difficult time. His answer was that if he kissed enough frogs, one would eventually turn into a princess! A few weeks later, he landed pretty much his dream job, thanks to kissing lots of frogs.

Activity leads to better results. Make the calls, meet people for socially distanced coffees, even where the potential appears low. These are your frogs. It beats sitting in the office.

 

Do something / anything

On the theme of doing nothing, don’t let days slip past. Rather than twiddling your thumbs, achieve something every day. Review your proposition, your website, your marketing messages. Write a blog post. Even clean the office, but don’t do nothing.

 

Remember that this is temporary

The world might appear a little grim at the moment, but this will pass. There are better days ahead and you want to give yourself the best chance of hitting the ground running when they arrive.

 

So, small goals, small wins, seek help and stay busy. And keep kissing those frogs.

What do you do when the flow of new clients dries up.

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As advisers are adjusting to working remotely from the office and distanced from clients, the challenge of attracting new clients has now been raised with me a number of times.

Most advisers have adjusted quickly to servicing existing clients, however attracting new clients has been more challenging. While the recent economic upheaval has created a difficult backdrop for all, the issue has been particularly challenging for advisers whose main source of new clients traditionally has been by referral, particularly where the adviser had an effective way of asking for referrals. Because client conversations are not quite as smooth when using Zoom etc, advisers are finding it more difficult to have effective referral conversations.

My advice? While referrals were and will always be a rich source of new clients, they can’t be your only approach. It’s time to go back to the first principles of marketing and to consider in particular the concepts of Segmentation, Targeting & Positioning (STP).

 

Some definitions

So we’ll start with a 30-second marketing lesson. Here is a definition of each, as set out by Philip Kotler, the grandfather of marketing education.

  • Market Segmentation: Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes.
  • Market Targeting: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.
  • Market Positioning: Arranging for a product (or service) to occupy a clear, distinctive and desirable place relative to competing products (or services) in the minds of target consumers.

 

What’s happening in the financial adviser market in Ireland?

Many financial advisers realise that a “one size fits all” proposition just doesn’t cut it any more. Either for the client who is looking for more than a generic service, or for the adviser who cannot profitably or successfully deliver the same service to all clients irrespective of their value, characteristics, needs etc.

As a result, many advisers are undertaking segmentation exercises by analysing both potential customers and their existing client bases. The goal is to identify all of the different groups of customers, possibly by sector, by business potential metrics, or by demographic factors.

Once the segmentation exercise is completed, the next task is to identify the segment(s) that you are going to target. These may for example be SME business owners within your county and surrounding counties, or corporate executives aged over 50. It’s quite possible that you will also decide to target another group such as newlyweds – they might offer lower value today, but offer growth potential in the future. You will decide your target groups based on your access to those people, the segment potential, your areas of expertise and specialism, the capability of your advisers etc.

Most advisers are relatively comfortable with these first two steps, it’s the third step of positioning that challenges people more. This is where you aim your proposition, your services and your communications at the groups you have identified to target. The reason people are uncomfortable with this is because through targeting specific groups, there is a risk of not appealing to others outside of your target groups – of leaving people out.

Of course the alternative is to try and talk to everybody, but the significant risk with this is that you can end up appealing to no-one.

 

Why STP is so important for financial advisers today

It’s this final step of having the courage to position yourself within a specific target market (or even a niche) that is a step too far for many advisers. They struggle with the idea that while attracting new clients might be quite tough today, that it might actually be easier if you narrow your focus! How does this make sense?

If you offer a generic service to clients, they will recognise this. They won’t feel any particular connection with what you do, as it is not targeted at them. Instead if you have a clear target market and all of your communications are aimed with that group specifically in mind, the customers within that group will connect with your messages and are more likely to view you as a specialist who is out to serve their specific needs.

There are lots of very good financial advisers operating in the Irish market. At the end of the day, how are you going to stand apart from the crowd if you offer a very generic service? Instead the answer may lie in identifying your ideal clients, and then developing your proposition and communication approaches to target them in a very structured way.

 

 

How do you build an intergenerational proposition?

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Is this a time to be talking about an inter-generational financial planning proposition? Maybe it is… First of all during these restricted times, it’s a lot more difficult to get out and mix among prospective clients. Secondly now that you probably have a bit more time on your hands, there’s an opportunity to spend some time creating a new offering – reaching out to the children of your clients.

In the United States, it is estimated that children do not retain their parent’s adviser in 90% – 95% of cases after their parent’s death. This results in the adviser’s remuneration from that client going immediately to zero. Is the figure likely to be significantly different in Ireland? The good news is that there is a lot that you can do to build solid relationships with the adult children of your clients.

First of all, it’s worth considering some ways in which you can get on the radar of adult children and then remain there.

 

Get to know the adult children

First of all, make sure that your client’s children know who you are. Seek permission from your client to introduce yourself to them – not to hound them for business, but instead that their children have a recognised and friendly face in the event of the death or loss of mental capacity of the parent. Should this happen, at least now you are a friendly face who has some chance of working collaboratively with the children into the future.

 

Look for opportunities to demonstrate your value

Then when you are introduced to your client’s children, take the relationship very slowly. Look to add value by adding them to your ongoing communications networks, after first of all finding out which communication channels they want you to use. Depending on their preferences, look to add them to your email newsletter, connect with them on LinkedIn, follow them on Twitter etc. If you are hosting a relevant seminar, you should even consider suggesting to your clients that they bring one of their adult children along to it.

 

Include them (as appropriate) in their parent’s financial plans

This is obviously an area in which you need to tread carefully, but there may well be areas of a parent’s financial planning in which it makes sense to involve their adult children. While parents may not want to share every small detail of their financial situation with their children, some planning will make lives easier down the road. At a minimum, seek to ensure your clients and their adult children understand the structure and implications of wills, enduring powers of attorney, gifting strategies and estate planning.

At the end of the day, you want the opportunity to demonstrate to the adult children of your clients that you really care about your clients, that their interests are paramount in everything that you do. They will see you a valuable, trusted adviser to their parents. And they will also hopefully see that you can carry out the same role for them too.

 

It is then worth turning your attention to considering some of the specific ways in which you might treat this younger cohort, in order for them to fully engage with you and to become long-term clients.

 

Have a proposition that “talks” to them

If your proposition is all about managing assets, this is not going to resonate with these younger clients – because they often don’t have any! However what they do probably have is significant income growth potential and the ability to build an asset pool in the future. Build a proposition and pricing structure that talks to them about their goals and needs, rather than that of more traditional, older clients.

 

Lifestyle planning is relevant

Yes, younger people usually have less assets. However younger people tend to have heads full of future dreams, goals and ambitions, more so than older people where life has become a little more settled and simple. Younger people have no sense though of how achievable their dreams are, or what they need to do to bring them to reality. That’s where your skills as a lifestyle financial planner come in.

 

Send them targeted communications

Sending “one size fits all” communications to your younger clients that you use to engage your clients in their 50’s and 60’s just won’t wash – your younger clients won’t be able to relate to it. You will need to alter your communication approach with your younger clients, by developing separate content that connects with them and their specific challenges at their stage in life.  It’s definitely more effort, but worth it in the long run.

 

Are you the right adviser for them?

The client bases of most financial planners tend to generally reflect the adviser in terms of age and other demographics. Potential clients tend to gravitate to people that they can easily connect with, who appear to be “like them”. This is something you need to carefully consider with younger clients. If you’re 20+ years older than your target younger clients, are they really going to connect with you? Or will they feel more comfortable with a younger adviser who they can easily relate to, and who will be with them over their full financial journey. Is it time to go out and hire a younger adviser, if you are really serious about expanding your client base among younger clients?

 

How will you charge?

This is a significant headache for advisers… how to make this segment viable, particularly as asset levels are low or non-existent. A trail commission basis probably won’t work for you, and these clients may well baulk at / not see sufficient value in a standard retainer or fee arrangement. So you may need to review your proposition to a “lite” version at a lower cost, with a view to increasing the services and your fees as the years progress. This is a tough one to get right, but can be achieved with careful planning and execution.

 

Building bridges to the next generation is a significant challenge, both in terms of attracting them and then delivering a proposition that engages them. However if you do this well, it will add significant long term value to your business. Maybe developing an inter-generational proposition is a really good use of your time over the coming months?

 

Do people trust you?

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“OF COURSE THEY DO!” I hear you shout indignantly! Because trust sits at the heart of a financial adviser’s business. It’s that critical ingredient that you can’t survive without, but unfortunately you can’t just go out and buy it, or even simply ask for it. It can only be earned by what you do, and by what other people say about you.

 

Trust in business is low…

Every year, I review the very insightful Edelman Trust Barometer, an annual, highly credible review of trust that has been carried out for 20 years now and across 28 different countries. They announce the results each year at the World Economic Forum in Davos. The full results for Ireland in 2020 are available here and are well worth a look. Edelman look at trust in each of the countries (one being Ireland) and examine trust across different sectors and industries.

 

In the chart below, we can see that trust in business in Ireland is low. While seen as somewhat competent, businesses score poorly in terms of ethical behaviour and we lag our international counterparts in this regard.

 

 

 

 

 

 

 

 

 


What’s the situation in relation to Financial Services?

As can be seen from the graph below, Financial Services is the least trusted industry sector of all. A fact we simply cannot ignore.

 

 

 

 

 

 

 

 

 

This is a critically important finding for all financial advisers to consider. While the poor level of trust applies to the sector as a whole and not specifically financial advisers, it underlines the challenge faced by all industry participants in building trust with potential clients. People you meet for the first time will often be starting out with a sense of distrust and scepticism. This cannot be ignored by you and your first task is to start building trust…

However every cloud has a silver lining. While financial services is the least trusted sector and is coming from an extremely low base after the economic crash, the sector is moving towards the other sectors. A lot done, a lot more to do…

 

 

 

 

 

 

 

 

 

Another chart that is of interest is the level of trust across different business types. This is great news for many financial advice firms out there!

 

 

 

 

 

 

 

 

 

 

“But my clients do trust me” I hear you say!

And I’ve no doubt that your clients do trust you… or else they wouldn’t stay with you. However the challenge is about appealing to all those people out there who are sceptical of the financial services industry, and potentially of financial advisers. How do you appeal to them?

It all starts with having a clear and compelling client value proposition, which is a clear, concise and compelling articulation of how the factors that are important to the customer are satisfied by you.

 

The What, How and Why of your business

To start to build a positive picture, leading to confidence in your ability in the eyes of prospective clients and ultimately to building trust, it’s worth considering the lessons of Simon Sinek, the famous author of “Start with Why”. Yes you need to be able to clearly define initially what it is that you do, so that clients can see the outcomes that they can expect. You then need to be able to communicate this effectively to clients. However it is difficult as a financial adviser to stand apart from the crowd in terms of what you do, as many of you deliver similar services.

However when you can set out in an engaging way how you work with clients, now you’re starting to get somewhere! When you are able to demonstrate the processes that you use, how you deliver advice, how you will serve your clients throughout their financial lifetimes; you are now in a strong position to start building durable trusted relationships. Potential clients will take a lot of comfort from understanding what they can expect from you, and this comfort in working with you will enhance their trust.

The real magic though in building trust is when you can clearly (and of course credibly!) communicate why you do what you do.  This will demonstrate your real reasons for being a financial adviser, your passion for what you do and ultimately your desires to deliver a really top quality proposition to your clients. And when you can communicate this effectively, this will build trust like nothing else.

 

In a future article, we will look in more detail at some of the actions you can take to help you build a trusted position in the eyes of all of your current and potential clients.