No two advisors are completely alike. Yet, they appear to be united in their worries about the future of their advice. In a recent discussion with top advisors in Canada, we asked:1 over the next 5 years, what do you believe will have the biggest impact on your role as an advisor and the services you provide to your clients? Their top 2 worries? Trust and compliance. No surprises here.
Top concerns of high-net-worth advisors
- Level of client trust in advisors
- Regulatory compliance requirements
Do you share these concerns? If you do, don’t worry; there’s a lot to be hopeful about and ways to overcome these challenges.
Studies show that advisors are close to the bottom of the list of professionals consumers trust.2 Why is that? Is the previous generation of sales-only advisors responsible? Is it the constant turnover of advisors and bank planners with a resulting inability to develop a long-term relationship and deliver advice for life? We’ll probably never really know exactly why, but whatever the reason, the best way to overcome a perceived lack of trust is to establish personal trust with your clients and prospects. Personal trust is all about putting clients’ needs over your own. It starts by not talking about yourself, but rather, asking questions — which can ultimately put you in a position of trusted advice.
According to the Financial Planning Standards Council, client loyalty and trust, based on service — not necessarily products — can help advisors demonstrate the value Canadians say they’re searching for in financial services.
The positive pull
While advisors have every right to be concerned about the future of regulatory compliance requirements — they have been and continue to be demanding — these regulations are really just trying to drive more client centricity, making sure that what is being done is in the best interests of clients. And isn’t that why you got into this business — to help people? Earning a clients’ trust is the positive byproduct of doing what’s right for them.
Even more encouraging is the fact that fee disclosure is not pushing clients away on the mutual fund side. When mutual fund clients were asked if they would change advisors (or stop seeking advice) as a result of fee disclosure, many Canadians said they wouldn’t. Their reasons for not switching or abandoning?3 Above all, they felt their current advisor:
- Was very capable at managing finances
- Provided a clear plan for managing finances
- Was easy to work with
- Was attached to their life in a positive way
As an advisor, you provide much more than advice when helping your clients meet their financial goals. And if you’re good at it, your clients know that – and see the value. If anything, changing regulations provide more opportunity for advisors to have conversations with clients and demonstrate the value of advice they can provide.
The same recent discussion with top advisors in Canada identified 2 other worries which may be the most-likely reasons people don’t seek advice:
- They’re confused about “who’s who” in the industry
- They think they don’t have enough assets to warrant advice
Clients are confused over titles in our industry
Can you blame them? The financial services industry is filled with different types of “advisors,” each with varying levels of education and offerings. There are insurance advisors, investment advisors, financial advisors, wealth advisors, estate planning advisors, and financial planners. Most consumers, including those who are advised clients, are unaware of specifics such as the educational and licensing requirements required to sell different financial products.4 Why does this misunderstanding matter? Clients don’t know to choose an advisor who can provide the advice they need — specifically for them — and they’re entering into relationships with advisors who may not be able to provide what they need. That’s a miss for the advisor and the client.
The too few — and too many — assets factor
While high-net-worth (HNW) advisors aren’t overly concerned about clients’ feeling they don’t have enough assets to warrant advice (because their clients do have high net worth), it should be a concern for advisors not in the HNW space. The fact is, one of the main reasons people don’t use an advisor is they think they don’t have “enough assets.”5For many Canadians, feeling as if they don’t have enough money is part of the inertia that keeps them from taking the first step in reaching out to an advisor.
On the other hand, the top advisors should (and probably do) worry about the fact that 3 in 10 wealthy Canadians don’t own life insurance because they believe they “have enough money to cover everything my family would need in the event of my death.”6 Yet, it’s these clients may need insurance protection the most because, as the saying goes, “the more you have, the more you have to lose.” A lack of understanding of the full value an advisor can provide — including demonstrating the value of having life insurance in place as a way to provide both human and financial capital benefits7 for the wealthy — is standing in your way.
We need to do our part
Whatever the worry, in most cases, a little knowledge can go a long way. The financial services industry, and advisors alike, need to work to increase Canadians’ understanding of the value of professional advice and help fill the financial literacy gap in Canada. It’s one of the ways we can continue to make an impact on helping Canadians secure their financial future. We know what advisors are worried about. Now’s the time to take the lead on bridging the gap and educating clients about the value of your advice.
1 “Value of your advice survey” of top-performing insurance advisors, Sun Life Financial, October 2017.
2 Ipsos “Canada’s Most and Least Trusted Professions,” September 2014.
3 Ipsos, Canadians and Financial Advice, 2017
4 Mintel Group Limited “Consumers and Financial Advice” 2016
5 Mintel Group Limited “Consumers and Financial Advice” 2016.
6 Sun Life Financial’s study of high net worth Canadians, conducted by Ipsos, 2016.
7 Sun Life Financial, “Life insurance for the wealthy: the myth-busting benefits,” 2014.