By Mark Nagle
We’re all pretty familiar with the saying “you are what you eat” we have an innate understanding that eating pies all week will have a detrimental effect on our health and well-being. That doesn’t mean the occasional pie is out of the question but moderation and balance is the key.
Advisers need to think about the content they consume relative to the skill set they require to do their jobs in exactly the same way as a balanced diet positively impacts your health.
Many enlightened advisers understand that the investment advice component of their service offering is under threat. The democratisation of money management (access to cheap, direct digital investment services) will almost certainly impact future revenue streams. This is good news because for too long advisers have created the illusion of value through valueless actions like the selection of managed funds. Many have charged their clients handsomely for this service which has amounted to nothing more than a de facto tax on clients’ investment returns. Is it any wonder our industry doesn’t have the respect some say it deserves?
The genie isn’t quite out of the bottle but the cork is coming loose and innovative advisers are already starting to shift their value proposition to one that if delivered well could repair the reputation of our industry. These advisers are still delivering strong investment solutions for their clients but they understand its value relative to improved client engagement at a much broader level.
In any period of evolution change has to be managed and I speak to many advisers who seek my experience in regards to articulating a modernised value proposition that shrinks the investment piece into the background. This re-positioning is confronting for advisers who have previously sold their expertise as investment managers. So what’s the answer? How can advisers manage this change?
Let’s think about the opening paragraph and replace food with content. In my view advisers that still spend much of their time reading about markets, listening to BDM’s flog the next best managed fund or hanging on every word about the economy are doing the equivalent of eating too many pies. Their mindset will not be able to cope with the changing world of advice, quite simply they need to balance out their diet. If the adviser isn’t developing and evolving his own mindset what chance does he have of helping his clients understand what the real value of advice is?
I have recently returned from a US study tour with Implemented Portfolios and was fascinated to observe how different types of content was received by the various parties attending the tour. The attendees were quite diverse; licensees, industry funds, advisers and the odd investment guy. What became apparent to me was that the non-investment material was far more engaging, for example when the brilliant Dr Frank Murtha spoke for nearly two hours about the psychology of money and investing the audience was blown away. The same can be said when the inimitable Josh Brown (The Reformed Broker) told the very human story of his personal journey from Wall Street salesman to Advice Industry thought leader.
When they are fortunate enough to be exposed to this type of progressive material the advice community laps it up, but most simply don’t get to hear this stuff and it’s stifling their ability to evolve as advisers. How many PD days can you recall where the content was dominated by a Psychologist? Instead the usual suspects continue to be rolled out not so subtly disguising a sales job as education in lieu of providing financial support for the event. There is rarely even an attempt to expand the diet of information; it’s simply a collection of different pie vendors.
As it stands education programs like the CFP fall well short when it comes to developing an advisers understanding of how his or her clients emotionally connect with money. Advisers that recognise this requirement are doing their best to adjust as the intellect in financial services slides ever more quickly away from the investment, product centric value set towards more enlightened forms of engagement and value.
If advisers are serious about innovation they need to consume content commensurate with the changing world of advice, books like Nudge (Sunstein and Thaler) or Kahneman’s Thinking Fast and Slow and more latterly Misbehaving (Thaler). There are other more relaxed forms of enlightened content from thinkers like Carl Richards all of which are easily accessible.
In advice terms we are what we consume, the creation of genuine value for our clients has never been about the investment piece in isolation and yet from DFP studies onwards advisers are encouraged to consume investment related content in proportions far greater than the value it produces. So my challenge to thoughtful advisers is change your diet, you will become fitter and leaner which will result in more energy, confidence and eloquence when engaging with your clients.