PRACTICE MANAGEMENT
PRACTICE MANAGEMENT Expand your focus Build a thriving sustainable practice in uncertain times Conventional wisdoms in advising and guiding investors are being challenged and found wanting. The information arbitrage between client and advisor is disappearing. Clients are overloaded with information. The media isn’t helping to curb negative sentiment. Clients are dissatisfied with the outcomes of their investments and according to the Dalbar report they have reason to be. If an advisor’s value proposition was defined as fund selection and fund performance, then that advisor is locked into a performance trap. The advisor has no control over market performance. Many financial plans rely too heavily on the market’s contribution to a client’s retirement as opposed to relying on the client’s efforts. If the advice narrative was based on market performance or an over-reliance on market performance, then some clients tend to hold the advisor responsible for the lack of market performance. To break from the market performance trap, an advisor must change their narrative away from market performance and fund picking. The three keys to build These three keys are foundational to the success of an advisory business: • Goal-based planning; • Co-planning; and • Enabling technology. A definition of goal-based planning At Allegiance our definition of goal-based financial planning is as follows: “A process of financial life planning for both shortand long-term goals to achieve the client’s goals and dreams in the context of the client’s personal economy including assets, liabilities, income and expenses; by managing and optimising the client’s resources to enable the client’s financial goals; and to manage risks that could frustrate the achievement of their goals. This includes the ability to identify and plan for the implications of: • Foreseen and unforeseen events in the short and long term; • The acquisition of assets now and in the future; • The disposals of assets now and in the future; • Managing debt; • Saving and investing; and • Planning for retirement.” According to Kobus Barnard, CEO of Allegiance Consulting, goal-based planning expands your focus into all aspects of your client’s financial life and eliminates the product-only focus. “From a financial planning perspective, we traditionally siloed a client’s financial goals into a disconnected discussion about a specific need and a specific solution to that need.” It was disconnected from the client’s personal circumstances and the mere disconnect from the client’s personal circumstances meant that it became product focussed. Co-planning Co-planning is allowing the client to become the author of their own financial destiny with the financial guidance or coaching of their advisor. If the client becomes the author of their own plan, it becomes their plan. Traditionally, after a client consultation, advisors drew up a financial plan and presented a document reflecting the client’s initial thoughts. Changes to the plan were cumbersome, because it normally required the advisor to go back to the office, change the document and return with an updated plan. Co-planning is the financial planning discipline of allowing the client to co-create their plan in real time. This means they become the authors of their financial journey. The mere fact that it becomes their plan triggers what is called in behaviour economics, the endowment effect or ownership effect. People are more likely to value their financial plan because it is their own. The final key: enabling technology Advisors underestimate how important a system can be to enable their business. Production is directly related to the planning components of the system. If the planning components enable co-planning, life planning and can go into deep financial engineering then the advisor is enabled to do the following: • build an advice-driven practice; • compete, especially in the high value markets; and • realistically manage client expectations, and consequently advice risk. • If you would like to see what a true goalbased planning system can do for you, come and have a look at Avalon. Contact Johan van der Vyver or Charlene van Staden at 012 360 0040 for a cappuccino and a demo. Kobus Barnard, CEO of Allegiance Consulting 10 www.bluechipjournal.co.za
Avalon can be the small change that can change your future. DOING NOTHING AT ALL (1.00) 365 = 1.00 VS SMALL CONSISTENT ACTION (1.01) 365 = 37.7 Small disciplines repeated with consistency lead to great achievements gained over time WWW.AVALON.CO.ZA
