This is an opinion piece by Warren Gibson, Director, Praemium Australia Pty Ltd.
The name of the game for financial advisers has to be, ‘bullet proof your business and position your clients for impending growth'.
Easier said than done? Not necessarily so, but it will take a few months to complete the process because there are two parts to it. Firstly, your business, i.e. getting systems and processes bedded down. And secondly, your clients - i.e. reassessing and profiling, redeeming as necessary and reinvesting appropriately.
Whether the market fallout has reached the bottom, is close to the bottom or still has a way to go is a moot point and one that makes little difference at the moment.
Most investors have either lost money, or gotten out of the market long ago. Fund managers have met the fallout head on and are dealing with it, with new strategies and positions being set with an eye on the recovery process.
Many advisers will still be settling clients and assessing the road forward to ensure business stability and continuity in the knowledge that it is easier to retain an existing client than it is to secure a new client, and that the best clients are the ones you already have. They're the ones that you have a relationship with, are likely better educated about financial and investment matters, and more likely to give you referrals.
A good analogy for this is like launching a hot air balloon. To launch, a hot air balloon requires burning of a fair bit of gas to heat the air and achieve liftoff. Once aloft it takes little gas and heat to maintain altitude, just a squirt from time to time. Business is often the same. It takes time and money to promote and grow a business, to establish alliances and to get repeat and referral business before critical mass is reached.
Few ready-made markets exist in the competitive world of financial services. But once you've built a business, you can retain your clients relatively easily by meeting issues head-on in a forthright and timely manner, communicating with clients regularly and adjusting strategies to meet the changing environment.
Clients look for their adviser to lead them. The direction is possibly less important than the act of leadership.
In the words of author Lloyd Jones: "The men who try to do something and fail are infinitely better than those who try nothing and succeed".
You cannot hope to replace lost capital and most reasonable people do not expect you can, but you can introduce a new level of service, upgrade your technology, change the way you report, adjust client expectations, embrace new investment options.
Be positive but realistic in your outlook. These are all signs you are not quitting on your clients, but working diligently to help them retain what they have and rebuild what, if any, has been lost.
There are often many paths to the same place that will suit different people, find these paths and lead your clients as you do when creating a financial strategy for them. Help them learn and understand.
So how will advisers move forward successfully in the current climate where most, if not all, clients have suffered not only a loss of capital but a loss of confidence? To start with, examine your business input and output - what do you subscribe to that assists in managing your clients investments, and can a change here improve things for your client and your business.
Do you want to expand your service offering? This may include research and access to market data, portfolio models and management tools for direct investing, improved performance reporting, lower cost solutions, greater administration efficiency or superannuation administration.
What can you do to improve output to your clients? How about a lower cost structure or fee-for-service model, an enriched investment experience with online reporting, better tax outcomes, direct investment options or SMA, consolidated reporting across all assets or portfolios?
From a business perspective, would outsourcing free up time or help you deliver new levels of service? Do you need something new to create a symbiotic relationship with other professionals such as accountants, stock brokers and SMSF administrators.
Perhaps a new revenue stream for your business? An example of this might be investment administration and tax management for active investors. This is a complex area and difficult for investors to manage efficiently.
I'm not sure who said this first, but it goes something like this, "if you continue to do what you've always done you'll continue to get what you've always got".
There has not been a better time to reinvent a financial advice business, unwind inefficient and costly investment structures and build a better business.
The financial planning winners in 2009 will be those advisers who can engage their clients with a new value proposition to offer their clients. This will be the way to go forward... unwind old inefficient platforms and redeem managed funds that no longer suit, assess the clients' position (where they are now, where they want to be, how long it will take to get there) , and reinvest for the future.
The 3 things an adviser will need - a strategy package to assess the client's position, such as CARM GPS; a risk assessment tool to assess the client's risk profile, such as Finemetrica; and an alternative investment vehicle that delivers efficiency, lower cost and greater control, such as an SMA, specifically an SMA driven by a scalable technology such as Praemium.
Warren Gibson
Director
Præmium Australia Pty Ltd
Disclaimer: The information contained in this brochure is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, individuals should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring a financial product.