Earlier this week I had a catch-up Zoom meeting with an old friend whom I have known through many years in the Financial Planning industry. The difference between us is that while I have been a client facing adviser, he has mostly been on the Corporate side of the industry. The topics he was keen to discuss included 12J, book sales / succession, DFM's sharing margin and Private Equity funds as these are the area’s he specializes in.
Having been in the industry for nearly 30 years and having seen and lived through the many changes (including no change) and disasters that have happened in that time, I am always keen to hear different views on where the future of our Profession lies. What makes these discussions even more interesting is how being in a particular segment or side of our industry influences these views.
So, this discussion was not very fruitful as coming from different places in the same industry we have different ideas of what “value” is for clients. My friend told me at the end of our conversation that Clem Sunter would classify me as a Hedgehog rather than a Fox; I was horrified….
For those who have not heard of these concepts here is a brief description:
A hedgehog sees one single future and makes all his plans around that, rejects all other futures and just goes for it. This is a very 'high stakes' strategy because if you get the future wrong, you lose everything. Foxes, on the other hand, have very bright eyes to pick up on changes in the environment, with the agility to get out of trouble quickly and pounce on opportunities.
In his opinion a fox in our industry would be someone who would be looking at new, exciting types of investments like venture capital funds and 12J, they would also consider getting a Cat 2 licence or working with a DFM to be able to share in the asset management fee and then also taking a share of the swing when trading currency.
Very clearly this fox is after “more rabbit” without having to do much differently, especially in the eyes of the client. While doing these things may lead to more profit for the Planner, they could likely erode value for the client due to lack of independence and in some cases, lack of transparency.
Many years ago, I realized that adding real value to clients lay not in products but in advice. I came across the concept of Lifestyle Financial Planning and since then my journey has been how to better and enhance this concept to help our clients to live their best life possible with what they have. Developing a real value proposition and enhancing our client experience is an ongoing process which will never end. In short, the client comes first in everything we do, always.
To this end I find myself chatting to financial planners all over the globe about coaching methods, cash flow planning models, CRM’s, use of social media platforms and many more concepts and things which can enhance our clients experience of what we deliver to them and how we do this. This can take a huge amount of time and effort, but the results are very worthwhile.
For me, this means I am behaving like a fox. Clients first, profits naturally flow from that.
The next two mornings after this chat my regular cycle and stroll with my mate Greg, our discussions were dominated by the hedgehog vs fox analogy, I was not happy being a hedgehog….
Fresh air, exercise and a bit of time bring clarity. I found a quote from Sunter which says, “it is better to be vaguely right than it is to be precisely wrong”
I thought back to when I started in the industry, before we had computers, to when we walked around with a rate book and worked out quotes with a calculator. The days when the minimum investment term was 10 years and a large part of our training included what commission we earned on the different products. As a 22-year-old I believed in the nobility of what I did, and I viewed my superiors as bright, honorable people who only did good.
Time proved me to be wrong on most of that and I count myself lucky to have worked this out on my own, the industry has also changed, not happily or voluntarily but through clients and regulators demanding value.
So where do I see the industry moving and what is the value that our clients want, will soon expect and that we will have to provide, to be relevant?
I see price and cost as being important especially in the absence of value so this will be non-negotiable. I see the value clients will be looking for to be in the ease of understanding their finances and working with a Financial Planner who puts their needs first and who makes the overall experience meaningful and real. This planner will focus on them and their lives first, the money second.
Squeezing more “value” out of the value chain is in fact squeezing more income out of the client and not necessary adding any more value, it is taking out the middleman to steal more margin. This sounds like the industry of old, doing more of the same. I understand how this can happen when one does not work with the actual client and this is where the industry needs to change. To me, this is being precisely wrong.
Success in giving clients more real value = more profit, this can only happen if the client comes first, not the money.
This morning Greg asked me, why be a fox? This is Africa, the honey badger rules supreme, he gets dirty, he gets aggressive, he lets no-one push him around in his quest to find what he wants (value).
We are living in times not seen in our lifetimes, as the quote from Vladimir Ilyich Lenin goes:
“There are decades where nothing happens; and there are weeks where decades happen.”
We are in those weeks.
Question everything, trust your gut, do not focus on the money, be brave, ignore others who belittle your idea’s, focus on the client not competitors. Work with those who will walk the road with you, proof is in actions.
Now let us go find some real value like a honey badger!
By Dirk Groeneveld