Needing the dough

The new regulations will achieve the aim of making the industry more professional but, in so doing, they will change the way advice is sold.

Almost four months into the new world, advisers have to agree fees at the beginning of the liaison process, before they undertake any work. For many – possibly the majority of advisers – this will be a very different way of working.

They are requesting fees before they have had the opportunity to build a deep level of understanding and rapport with the client, and in most cases prior to showing the considerable value they could add.

This is a huge change in working practice because up until now a client could walk away from the advice process at any stage without incurring any costs.

So, in this new world, advisers need to sell themselves and the service they offer to the client upfront and convince them that the advice process is worth paying for, rather than taking him or her through the process to experience its worth before making a financial commitment.

Traditionally the price has not been illustrated so sharply until a second or even third meeting, often once a product has been sold and the adviser has earned his revenue. Clients have not felt as if they were putting their ‘hands in their pocket’ and advisers were not required to discuss the price of their services until they could show the value they had provided.

I believe that advisers offering pensions and investment advice, and those who have operated exclusively on commission historically, are probably already finding clients particularly resistant to these changes.

To sell the advice process to their clients, advisers need to think about presenting their proposition with quality and clarity, bringing it to life and making it real. This is certainly much more than just listing it as a set of services.

One financial adviser firm has done a great deal to design a high-quality proposition to illustrate to clients, from the outset, the value that it can add. Creating cash-flow forecasts and bespoke financial strategies for individual clients demonstrates the value that can be added to their personal, and often unique, set of circumstances.

For many years the development of financial advisers has focused on their level of professional qualifications. There has been very little attention given to their ability to motivate clients to buy advisers’ services and knowledge.

Many would argue that an adviser is, and should be, well versed in sales techniques. But the regulatory changes have taken this to a whole new level, and I would go as far as to say that all advisers should go through rigorous sales training on how to have an upfront ‘price’ conversation with clients about charges.

Ironically the desire through RDR to eliminate the product ‘salesman’ will actually force financial advisers to retrain themselves and develop superior sales skills in order to really help their clients through the financial advice process.

Selling is often misunderstood but if it is conducted with elegance, respect and integrity, it provides a vital service and will help clients make the right decisions at the right time.

Many financial advisers are now becoming more aware of this challenge but some are struggling to adapt to the changes. We expect to see a significant demand for good old-fashioned sales training to help them through this significant transition.

The majority of advisers are capable of doing well in sales, but the changes brought about by RDR require a whole new mindset, centred on managing of expectations for both advisers and clients, and empowering them to take action. Presenting significant value add benefits upfront.

There is no doubt that those who survive this storm will become better than ever at selling and marketing. They will be providing more than just technical detail and will demonstrate a strong and deep emotional connection with their clients.

I also believe that the sale to existing clients is the hardest. If a client has worked with their adviser in one way for a long period of time it is difficult to ask them to make changes to this and to request money upfront or to send a bill, especially if there is little or no change to the service being offered.

Those who can communicate effectively to their clients will be the ones to prosper in the RDR world.

The new regulations compel advisers to introduce ‘price’ early and before the desire to buy has reached the right level. It takes time for many clients to understand enough to make a good buying decision.

There are two things that financial advisers should do. First, they need to review their marketing and, in particular, the way they position themselves and their firm to new prospects. It is important that the high tension, low trust at the early stages of the advice process swiftly moves to high trust, low tension. Financial advisers need to explore ways of helping prospective clients to get to know them much earlier in the process so that the trust and desire are at the correct level before the element of price is introduced. They also need to have a strong online presence to start building rapport at the earliest stage possible, even before they meet with the client. They will also be looking more at working with professional connections for introductions to help speed this process up.

I think most would agree that the best way is to work with personal referrals because the relationship with the referee helps create a high level of trust quickly. Even though this is the utopia for financial advisers, most have failed to master the art of obtaining a regular flow of referrals in any significant way.

Second, financial advisers must relearn sales and presentation skills. If conducted with respect, elegance and with integrity they are an adviser’s and a client’s best friend. It will certainly help to achieve their objectives, yet too many take this for granted. Many feel unprepared for the future.

Roger Brosch is chief executive of Foster Denovo

Key points

Advisers have to agree fees at the beginning of the liaison process before they undertake any work.

Many would argue that an adviser is, and should be, well versed in sales techniques.

The new regulations compel advisers to introduce ‘price’ early and before the desire to buy has reached the right level.