After being asked to speak to a room full of graduates from universities across Sydney next month, I begun to think through what they should be doing to prepare themselves for their first steps in to the financial planning world.
Over the past eight years I have witnessed the destruction of the financial planning as a wealth management industry and the slow birth of a new profession in financial advice.
The value propositions of most financial planning firms have been tested and as the commoditisation of products moves in to the next stage of digital advice, most traditional financial planning firms will die a slow death unless they change.
What graduates are learning today, I believe will be outdated in a few years if not tomorrow. What we have done in the past, will definitely not be the same in the years to come, let alone in 2017.
The rebirth of financial advice is exciting. The long and worn out inefficient processes of the past will be gone and technology will takeover. Real time financial reporting, live scenario role plays with clients, instant advice capability, straight through processing and behavioural management tools.
The weeks of going back and forth for information, will move to an online platform where all financial transactions are tracked and advice moves to focus on what is going to make people happy not only in the years ahead – but right now.
Product differentiation will be dead. Strategies will be commoditised as software improves and no longer will the adviser be seen as the person knows how to invest my money to beat the market, the one who tells me what strategy I need to do or what is the best superfund. All of that will be slowly removed and advice will be now done with a client in real time - not after a month of producing a pointless SOA. The process will be done together side by side and in real time. It will be based around education empowerment. Not the delegation of all responsibility to an adviser and hope they know what they are doing.
This type of advice with be conversational, behavioural and decision management. It will focus clients clearly on what matters to them – their purpose and their overall wellbeing. It will be independent, pragmatic and objective.
It will move further on from just financial decisions to life decisions. It will be built around improving their mindset in all parts of life. It will encourage gratitude and positive phycology. It will help them focus on their strengths and build clarity in what they want their life to be.
Some questions we may help in could be - do you look for a more rewarding job, do you have more children, do you say no to a promotion and ask for flexible hours, do you get a personal trainer for your health, do you volunteer your time to the community, do you spend more time on holidays with your family, do you get out of the rat race and downsize to the country, do you start the business you’ve always wanted, do you simplify your life and sell all your assets.
Advice will help clients prioritise their life by reframing inbuilt beliefs that are holding them back. These may be from family, society, memories or experiences. It will explore the reasons behind their values and why these matter so much to them. It will question what they want out of life but why is this important to them to pursue anything. It will factor in what they want to leave both financially, in others and the world but explore why this even matters at all. It will give them the tools to manage their time, money and monitor their behaviours. It will create new habits and thought processes around money and the world.
The advice will be helping clients build wealth with a purpose not because they feel they should or for security. It will encourage clients to feel empowered around saving and investing because it will help them achieve what they really value in life. That could be spending years traveling the world, reducing working hours, volunteering in issues they care about, educating their children, making a difference in the lives of others, starting a new business, building a dream home for all the family - whatever is going to make someone truly happy, content and satisfied. No longer will it be the traditional “lets save for your retirement” nonsense the financial advice world currently focuses on.
Once we know where we are hearing, sure part of the advice will be to educate them on how to best manage, invest and growth wealth. But it will be real time strategy focused and risk management of financial decisions. No longer will it be the traditional approach to maximise the financial outcome for the client. It will focus entirely on the things we can control today, not predicating what we don’t and looking at financial consequences of decisions on wellbeing.
Even if it doesn’t make sense financially, it might wellbeing wise.
A relationship will be built on trust and an alignment of interest. A coaching partnership where the adviser is empowering their clients through educating them and keeping them accountable to what they need to achieve.
The relationship will not be based on one hour yearly reviews but shorter catch ups on a more regular basis and with the power of video conferencing and real time data. The advice may be to discuss where cash flow is going the last few months. It could be discussing the life and financial implications of a potential new role. It could be discussing a recent stock market fall and deciding whether it is now wise to begin to invest more. It might be discussing a new property manager because the current one is not returning calls. It might be discussing time management challenges and how better to manage their time. It could be getting other coaches involved to improve their strengths in the workforce.
Who knows what the conversations will discuss but it will be weighing up life decisions with financial ones.
As you can see, I truly believe that the digital revolution will kill the current model of advice and investment value propositions of the majority of firms will be questioned beyond repair.
Clients will demand fees to be fixed, independent and consistent. They will want to move up and down the fee options depending on what they do and do not value. Most will want to potentially one day have the skills, knowledge and understanding that they could now manage everything themselves if they had the time and discipline. They may choose to better spend their time elsewhere and value staying on track and one step ahead by continuing to employ a financial coach.
You see financial advice will be a choice in the future because technology will help the ones who do not value a coaching relationship. For the ones, who value a coach, the financial planning industry will evolve in to one of the most rewarding and valuable roles in helping Australians live a fulfilling and meaningful life based on their terms.
As we all know unless you take action, advice is pointless.
The power of a coaching relationship is that it is based on making good decisions, constantly improving and most importantly accountability to take action.
The finances will never be the most important area of your life. But with a strong clear plan financially, you can focus on what are the most important areas of your life – family, friendships, the community, your purpose, your health.