Has an obsession with compliance shifted advisers’ focus away from demonstrating value?

In this article, we look at how compliance has completely dominated the focus of an advice practice, and the ways you can shift that focus back to demonstrating the value of your advice.

The advice process…

After the adviser has met with the client, they are full of optimism of how their advice could bring tangible and lasting benefits to the clients life. However, this is where the optimism ends and the advice process takes over. The adviser needs to write file notes to record what was discussed in the meeting, and hand the file off to the support team to enter details into Xplan and conduct research. The value of the advice has been lost in translation.

Advice compliance is very prescriptive and overly complex. We have the 7 steps of harbour which outlines each of the steps an advice file needs to demonstrate to meet regulatory standards.

Whilst the seven steps of safe harbour doesn’t prescribe a step for demonstrating value, that doesn’t mean you can’t demonstrate value using the safe harbour steps. When providing advice, you need to build a basis for the advice. And building the basis requires you to understand your client, collect their relevant circumstances and conduct research into their financial products and which products might meet their needs.

The future of advice might not be so prescriptive, but you will still need to undertake these steps to build your basis.

The SOA Template:

As highlighted in the recent Quality of Advice Review, consumers find SOAs to be too long. SOAs do not, in the main, provide advice in a form that consumers are readily able to understand.

The SOA template is a starting point for the advice document. It has been coded to ensure that the document covers off on all the regulatory requirements and pulls through data from all the Xplan modules. It provides some consistency in how the advice is formatted and provided. The issue here is that too often the paraplanner relies on standard text and filling the SOA with disclosure. But that doesn’t mean you cant use the SOA to demonstrate value.

How can you demonstrate value?… it starts with why...

Regardless of what product you are selling, or service you are delivering, the most successful businesses start with why. Understanding your clients why... Communicate your advice from the inside out…

1. Why Is The Client Seeking Your Advice? (Objective): Go back to the very start of the process. When constructing their goals and objectives, make it something that they will resonate with. If the client resonates with their identified goals and objectives, it will show that you have listened and understood their needs. The client is more likely to understand the value of your advice when it reflects themselves.

2. How Are They Going To Achieve This? (Recommendation): Make your advice easy to follow. If there are multiple steps and moving parts such as making contributions and starting pensions, use a flow diagram. A picture says a thousand words. You can use software such as canva (which is free) to show a flowchart diagram. The SOA Template won’t cater for visual flowcharts (Xplan code doesnt work that way), but you can still use flowcharts to explain your advice.

3. What Are The Benefits (Reasons): Clearly articulate the benefits of your advice. Don’t just fill the advice document full of standard text. It might be saving on tax or having enough money to retire. Explain the benefits in simple terms and relate it back to their ‘why’.

Conclusion:

Whether the regulatory framework is a rigid 7 steps, or a more fluent obligation to provide ‘good advice’ (i.e. post - QAR), the fundamentals remain the same. Demonstrating the value (and appropriateness) of your advice will start with understanding your clients ‘why’ and communciate your advice from the inside out.

As a licensee, IIP takes a pragmatic approach to advice and compliance, putting your clients needs first.