What do I think good Financial Advice looks like
August 2, 2017 - 4 minutes read
Posted by Claire Parker
I have been pretty vocal about being disappointed about the state of the financial advisory profession. I even co founded a company to help shape the future of Financial Advice called NextGen Planners.
I do however think we are starting to see a sea of change in the financial advisory world. There seems to be a new generation emerging that I feel proud to be part of. I thought I would clarify some thoughts on this blog about what I think financial advice should look like. I write this as an adviser and someone whose family has been through really poor financial advice and mis-selling.
Good Financial Advisers never lead with products.
If a financial adviser leads with a product, a fancy solution or the next big thing – Run Away!
I have seen well titled “Financial Advisers” “Wealth Managers” and “Financial Planners” push products and solutions to clients like they are delivering Ford Focuses (sorry for the reference to car salesmen).
I strongly believe that you should never advise a client on their finances until you have a clear understanding of their current financial position and where they want to go. How can you advise in someone’s best interests if you don’t know these two facts. Yes it lengthens the process for an adviser and is actually more challenging to question the client on their destination but it pays off with long standing adviser/client relationships rather than transactional ones.
A good financial adviser or planner or wealth manager should always try to understand you as a client or family first. Most good advisers would not feel confident advising until they did. The first meeting will usually be about you with a good adviser, not what they have to sell.
Financial forecasting software is really powerful
Once the adviser understands your current situation and where you want to go, then they now should be able to put you on the path to building a financial plan/strategy or roadmap and be invested in helping you stick to it.
To do this, more tech savvy financial advisers are starting to use financial forecasting tools – think business cash flow forecasting but with your personal finances. This is the basis of nearly every meeting with my clients. They absolutely love it and it is really powerful to kick a few ideas or scenarios around. This is an extremely useful exercise for a client with a business where your financial independence might be linked to the success of the business.
Here is quick 4 minute demo of the software we use at Xentum.
As you can see in this video (with me narrating), it is incredibly useful, particularly for a business owner. I do it and keep it up to date for my own family and it keeps my mind clear at all times on our financial goals and what I need to do to make them a reality.
The Service should be tangible
I am constantly talking about this to other NextGen Planners. I believe that building a tangible service has given me a real edge over other financial planners. The issue I saw in Financial Advice a few years ago was that many clients didn’t really know exactly what they were paying for and what service they were going to be delivered.
The Financial Advisory profession’s argument was that good financial advice offered a huge amount of value that wasn’t often quantifiable. I wrote about this here
I still believe though that clients of financial advice should still know exactly what they are paying and what they should expect as a minimum. This is pretty standard for most sectors apart from financial advice.
My niche is mainly business owners who were struggling to find the time and energy to look after their personal finances. Every time I take on a new client, we build the calendar year ahead to suit their schedule and requirements. I love the look on the client’s face when I tell them this, it is almost relief.
Here is an example of one I built only a couple of weeks age with a CEO of multi million pound turnover business:
September – Business Planning meeting – specifically to sort shareholder agreements and put a business continuity plan in place
December – Financial Planning meeting – to revisit the financial plan we carried out on the software and make sure we are both happy going into 2018 which is set to be an important year for the business
February – Tax Planning meeting – to explore opportunities for any tax planning prior to April 5th (tax year end)
June – Business Planning Meeting (As the company year end in July, we will just make sure we don’t miss any opportunities with the business planning , e.g. pensions).
Some clients also like to have income/expenditure planning and investment planning meetings. We build it together as part of the initial process once we have a strong financial plan in place.
I am really proud of this process as it makes my service tangible and my clients understand what they get each year for my fees. I don’t see many others like it in the market.
I could have also talked about technology like video conferencing, client portals and cloud based storage but these are all becoming the norm for a Next Generation Adviser and hopefully it will continue to evolve.