Tim Sargisson: Three crucial questions for the adviser community

Advisory thought leaders are starting to flesh out the ways human advisers create value for clients but, warns Tim Sargisson, the sector still has some hard thinking to do.

The 10th annual Platforum Conference took place earlier this month, taking as its theme ‘The year of the customer – putting customers at the heart of retail investing’. As one of the panellists, I was asked to debate how we, as an industry, can best develop customer-centric propositions.

Our three-question brief was probably too wide and far-reaching for the time available and we only scratched the surface. As such, for those of you who were there and want more – and indeed for those of you who were not there and are interested in the views from this particular panellist – here goes.

Q1: What do Customers Really Want?

On one level, it is disappointing that we still have to debate this issue, especially as there is plenty of research out there highlighting customer’s four key demands:
* Personalisation: Clients are showing a real interest in working with financial advisers who understand their individual needs, wants, goals and timetables, and take these into account when coming up with a financial plan.

* Expertise: This is defined as mastery of finances as well as up-to-date knowledge of the macroeconomic factors.

* Empathy: An empathetic financial adviser is one who truly listens to clients, ensuring they understand their needs, and who demonstrates that they care. Investors are real people, with real emotions.

* Trust: Customers are looking for a trusted adviser to guide them through the ups and downs of investing. Trust is having the confidence that an adviser’s decisions is in their best interests.

Q2: What Responsibility Does Our Industry Bear In Driving Up Customer Engagement And How Can We Achieve It?

The natural response is to agree we all have a clear responsibility – however, I am one individual who believes we allow ourselves to be distracted by issues that have no resonance with customers. As an example, the earlier research makes clear that none of the top four customer ‘wants’ includes picking funds. So, why do numbers of advisers still see that as ‘adviser alpha’?

In addition, there is the continuing debate among advisers over independent and restricted advice. The FCA has shown the public has zero understanding of the matter and zero interest in what the distinction means. Yet many advisers continue to value it as a ‘USP’ in terms of any customer proposition.

300 years ago saw the publication of Gulliver’s Travels, in which Jonathan Swift referred to the continuing war between the Big-Endians and the Little-Endians. This spat was all about over which end of the egg to break.

I contend that it is for you and your firm to decide which end of the egg you choose to break, but for the customer the debate has no significance. The important issue is about which approach better manages risk in your business and your client’s portfolio and is truly aligned to delivering what your client wants.

In other words, driving up customer engagement is surely about explaining how advisers better support customers in achieving their goals and managing risk in their portfolio. And that is why we would do better to focus on customer outcomes.

Advisers need to position themselves as architects who deliver a personalised service and develop strong personal relationships where they have a deep understanding of the client’s circumstances.

Successful advisers will need to demonstrate a ‘broad brush’ knowledge of financial planning, which covers a range of areas, instead of focusing on a single area, such as pensions. It is also a great benefit to clients that any recommendations are personally suited to the individual, and their tolerance of risk is continually balanced with their long-term objectives.

Q3: What Does Advice Mean To The Customer And Is The Current System Meeting Their Needs?

Well, if the latest pension’s freedom data is to be believed, the answer is surely ‘not much’. Based on information from the Association of British Insurers and the Pensions Policy Institute, 300,000 savers took out cash lump sums without obtaining advice. It suggests no one who took out a lump sum between April 2015 and March 2016 took advice on doing so.

At the same time, the TUC says 15% of those taking out drawdown products last year did this on a non-advised basis, while 74% did not use an adviser to buy an annuity.

The fact is, we are not seen as delivering what the customer wants or needs. This is not to say that we have not delivered but customer perceptions are important and, now the public really needs us in areas such as pension freedom or workplace pensions, we are not recognised as being able to help.

Going forward, in order to distinguish ourselves from ‘robo-advisers’ and stand out as superior options for potential clients, planning-focused advisers need to do a better job clearly demonstrating the great things they do for clients.

Advisory thought leaders are starting to flesh out the ways human advisers create value for clients, but the community can do more to add substance to these outlines. Some widely cited sources of adviser’s alpha include:
* Preventing risky or irrational investor decisions
* Driving improved savings behaviour
* Providing investment recommendations that appropriately incorporate a client’s holistic needs.

Clearly, there is still plenty to do.

Published on 21st October 2016