Positioning the value of advice was the focus of this year’s AFA National Roadshow as attendees heard expert tips from some of the industry’s best…
The Future of Financial Advice (FoFA) reforms are not an issue for businesses that have active relationships with their clients, according to Stewart Bell, from Elixir Consulting.
“Clients with a financial planning relationship, and who are engaged in that advice, generally see value in that relationship and are willing to pay for it. The challenge for many businesses is actually in disengaged clients, clients whom they haven’t had a relationship with for a while, and also those new clients who should really be speaking to a financial adviser, but don’t.”
Clients with a financial planning relationship, and who are engaged in that advice, generally see value in that relationship and are willing to pay for it
According to Mr Bell, the most significant concern advisers have in relation to FoFA is the preservation of business valuation. “A lot of planners believe in their hearts that their clients won’t pay fees. I’d suggest to you that is a barrier that exists primarily in the minds of planners.
“In my experience, the reality is when fees are positioned correctly, and when it’s clear what the fees are for, and what they’re linked to, and when trust is present in a relationship, then fees are rarely an issue. If you’re willing to accept this kind of reality, then FoFA suddenly becomes a source of significant opportunity.”
AFA Adviser of the Year, Steve Salvia, said that he positions fees by “perfecting the value stack”.
The value you provide has to be greater than the client’s perception of the cost
“Client’s will pay us if they perceive there’s a value. So the value stack is … like a see-saw. The value you provide has to be greater than the client’s perception of the cost.”
He explained that by outlining every single piece of value that comes from the service he provides, the dollars become irrelevant.
“Stop giving free financial advice away. Everyone is prepared to pay because they need it.”
Mr Salvia used the analogy of a ‘cookie’ to demonstrate that advisers need to own their advice in order to be able to sell it. “I’ve got a saying in the business: ‘I’ve got the cookie’,” he said. “We’ve all got the cookie. Everyone wants our cookie. I let my clients touch, taste and feel the cookie, but if they want the cookie, they have to pay.”
Andrew Shakespeare, the AFA’s Rising Star of the Year, said that he was guilty of giving away the ‘cookie’.
“I was giving away a lot of advice for free. Steve talks about the ‘cookie’. I was chucking the cookie at them. I was stuffing it in their face. I was giving them jars of cookies. And I was getting nothing in return.
“I was originally spending a lot of time on the close and solution mode, and I had to learn to flip it around.
“You’ve got to spend more time on the problem, and drag out the desires of the client, and spend a lot of time on that. Know what their values are, know what really drives them. Don’t go to solution mode until you get all those understood. Then the close just happens,” he said.
Know what their values are, know what really drives them.
Mr Shakespeare added that he is also careful to remind his clients every year why they need his services on an ongoing basis.
“If there’s any reason why opt-in shouldn’t be brought in, here’s one of the reasons why. If the Government stopped changing things at each Federal Budget we’d be all right. But each year they do change it. And this could impact seriously on our clients’ situation. Take the concessional caps for super contributions. There could be a major impact if the client opts out of our service and is still doing over-contribution (into their super). Who’s liability is it?
“Their preferences and goals are also going to change over time and there will also be changes in their own financial circumstances. So I just remind them why I’m needed every year.”
