Jayson Forrest is the managing editor of Money & Life Magazine.
For a more sustainable business model, Mitch Anthony encourages planners to change their central value proposition to one that is focused on the life of the client.
As we rapidly head towards a new decade, the traditional role of the advice professional has never been under as much pressure. New technology, changing client expectations, regulatory change and the escalating cost of advice, are all impacting the delivery of advice.
But they are challenges not confined to Australia, with overseas markets also facing similar hurdles. And who better to talk about the offshore experience than financial planning coach and author, Mitch Anthony.
Mitch was a standout speaker at the 2018 Congress and he is back again for this year’s FPA Professionals Congress, where he will be appearing on a panel session of global planners (from Singapore, U.K., U.S. and South Africa), sharing their insights about the challenges from their part of the world, and how they are navigating change to develop sustainable business models.
If you heard Mitch speak last year, there’s one thing he doesn’t dabble in – procrastination. Mitch is very upfront about the challenges facing the financial services industry, but they’re not insurmountable.
Speaking at last year’s Congress, Mitch says he sensed a lot of fear and apprehension amongst planners in relation to all the uncertainty that change was bringing to the profession. But he dismisses any idea that this is unique to Australia and that planners here cannot learn from what’s happening to their colleagues overseas.
“I’ve seen this type of uncertainty and fear take place in other markets, including the U.S., when legislative change causes a shakeout within the industry, and the good name of ‘financial advice’ is tarnished,” he says.
“What I encourage planners to do is to transcend all that fear and uncertainty with your comportment and with your conversation with clients. Planners need to demonstrate what real advice is and what a real planner/client relationship looks like.”
Vaporous and vacuous
Form a global perspective, Mitch believes we are at a “one of a kind inflection point” in financial services, with value propositions that are either ‘vaporous’ or ‘vacuous’.
For Mitch, a vaporous value propositions involves asset allocation and portfolio rebalancing, which can be easily replaced by technology. He says there are companies in the U.S. offering asset allocation and rebalancing for zero basis points, and “you can’t make a living on zero basis points”.
“When a planner hangs their hat on doing something like asset allocation and rebalancing, and is charging their client 100-150bps, but suddenly the client realises they can get that done for 25bps, your value proposition has just evaporated.”
And what does he mean by a vacuous value proposition?
“This is when you chase a number for a client,” Mitch says. “Do you remember when you were younger and you had a specific number in mind, thinking that if you could ever make that much money, then everything would be wonderful? Well, numbers actually mean nothing. That’s a vacuous value proposition.”
He points to relative investment performance, saying comparing your results to an index or a competitor is meaningless.
“One of the things I emphasis is not to engage in comparative conversations, because human beings are all on different paths. What’s important is that for progress to be meaningful, it has to be highly personal. As soon as you start comparing what you’re getting to what somebody else is getting, or what an index is getting, it’s no longer about you.
“So, I think planners, both here and overseas, have been hanging their hats on these value propositions, but they’re really meaningless; they are vaporous and vacuous.”
Return on Life
Instead, Mitch urges planners to change their central value proposition to one that is focused on the life of the client – Return on Life™ (ROL).
According to Mitch, year in and year out, clients are being compared with last year’s returns, indexes and competitors. He says it’s a no-win game, and the time has come for planners to change their central value proposition from ROI (return on investment) to ROL.
“Today’s clients want more from you than being a purveyor of products or an asset allocator. They can get these things elsewhere and at a much lower cost,” he says. “By becoming an ROL planner, you can demonstrate your wisdom, experience and insights, and help your clients clarify their life transitions, priorities and goals. You already have the tools and the skills to make a difference in their lives.”
For clients, money has purpose, says Mitch. But as a planner, if you don’t understand the purpose of that money, then the planner is really just operating in a black hole.
“My definition on ROL is to get the best life possible with the money you have. You don’t need to be a mega millionaire to have a life, you just have to have wise money management.”
Mitch believes what consumers are desperately in need of is wisdom and guidance in their financial decision-making. “And that’s what the true definition of advice is. It’s not selling a product. It’s wisdom and guidance.
“When your value proposition is tied to the wellbeing of your client and their financial freedom, which allows them to do what they want, at the pace they choose, with the people they want to work with… well, you’ve got something that is powerful.”
Change your mindset
According to Mitch, reappraising your value proposition will be the key to success, as the profession evolves and adapts to changing client expectations.
“The processes and value proposition that planners present to their clients has to become more personal and personalised. And for that to happen, we have to realise that the client’s story and journey is more important than the client’s numbers,” he says.
“It’s not about a story of numbers, it’s about a number of stories that tell us where the client has been, where they are at today and where they are headed, as their story and life unfold into the future. So, if you want a ‘sticky’ value position, then it has to resonate with the life and the soul of the client.”
To create this ‘sticky’ value proposition, Mitch has developed a process called a ‘financial lifeline’, where the planner collaboratively works with the client to chart out the next 15-20 years, including all the life transition changes that are likely to occur during that period, such as children leaving home and career changes. These changes are all charted out on a client’s personalised lifeline. As Mitch says: “It’s better to prepare than repair.”
“If we wait for these events to happen, then we’re going to be left cleaning up the financial mess of our clients. But if we are proactive and prepare ahead of these events, we can ensure our clients are in much better shape, both mentally and financially, when they do occur.”
Mitch adds that the biggest financial mistakes people make tend to happen during these life stage transitions, when emotions run high and life is unsettled.
“So, mapping out a client’s lifeline over the next 15-20 years allows the planner/client relationship to take on a highly personalised and very real human aspect. It’s an excellent way for planners to engage more closely with their clients around key life stages, thereby providing a more tangible value proposition.”
By making financial planning a more personal offering, Mitch believes planners can take the first step in rebuilding trust that has eroded over recent years due to industry misconduct. To him, it’s a ‘no brainer’. “However, I honestly believe you can’t rebuild trust with an industry, you can only rebuild trust with an individual. It all comes down to how you, as a planner, show up to work as a human being, with integrity and genuine interest in your client’s wellbeing.”
As the first step in rebuilding trust, Mitch encourages planners to properly understand what transparency is and to demonstrate transparency to clients. That includes how much you get paid, how often you get paid, why you get paid, and what the value is you’re providing to your clients.
“When it comes to transparency, there is a huge difference between it and disclosure,” he says. “Disclosure is what you have to do because it’s been legislated. Transparency is what you choose to do because you don’t want any mystery or opaqueness in your relationship with the client, and because it’s ethically the right thing to do.”
In addition to Mitch appearing on the panel session of global planners at Congress, he will also be conducting a workshop on ‘building relationships that last and flourish’, which begs the question, how do you build relationships that last and flourish?
“The key is for planners to work on the human aspects of delivering advice,” Mitch says.
He qualifies this by adding that the financial services industry is at a crossroads between product and process, with processes “going down the drain” of commoditisation.
“We have companies in the U.S. offering financial plans for 25bps. So, the fork in the road for the profession is between money-centred advice and life-centred advice. I believe the way forward is life-centred advice, in which case, planners need to improve their skills on the human side of this business,” he says.
“People are complex and you can’t treat them as a soft skill add-on. The soft skills in planning is the hard stuff. Computers and algorithms can work out all the hard, technical stuff. Planning is all about human connection and that’s something we can never forget, if this profession is to remain relevant and vibrant in the years ahead.”
A key to building relationships that last is the open exchange of stories and experiences between client and planner, which also helps build trust and empathy in the relationship.
“When it comes to human connection, I challenge planners to become better biographers of their clients’ stories, as well as getting better at sharing certain aspects of their own story. By doing so, your clients will be able to more effectively connect with you.”
His second key to building relationships that last is for planners to become “fiscal philosophers”. But what does that mean?
“It means having a point of view,” Mitch says. “Share with your clients the principles that you abide by and articulate these principles with conviction. This is what I call the ‘fiscalosophy’ of advice.
“It’s important for clients today to know they are interacting with a financial planner who has a point of view. They want a professional who is informed by experience and who truly wants to help them make progress in their life. People will follow someone who has a point of view that resonates with them.”
It sounds easy in theory, but is it difficult to put these two key elements together when building relationships that last?
“It’s all about the dialogue,” Mitch says. “It’s about opening up that dialogue that resonates with the client. For example, you might say: ‘Look, everybody else might just be talking about your money and your investment returns, and yes, we will also talk about that but that’s not why we’re here. Why we’re here is for you to get to where you want to be in life; to have the life you want to have. We understand your money has purpose.’
“So, planners need to get better opening up the dialogue with clients in that context.”
Mitch strongly believes that advice professionals need to earn the right to talk to clients about their money, which means taking the time to truly understand the client, their pain points and their objectives. He says, planners need time with their clients to understand: where they’ve been, where they’re at, and where they’re going. “Only then can they begin diving into the financial planning process.”
Mitch Anthony will be part of a panel discussion at the 2019 FPA Professionals Congress in Melbourne (27-29 November). He will also be conducting a workshop on ‘How to build relationships that last and flourish’. For more information on the Congress program, click here.
About Mitch Anthony
Mitch Anthony is the President of Advisor Insights. He has been creating innovative discovery approaches for the financial planning community for the past two decades. He is known for having created ‘Financial Life Planning’ (2001), ‘Return on Life’ (2005), and ‘Life-Centered Planning’ (2017). A prolific author, Mitch’s books include StorySelling for Financial Advisors, The New Retirementality, and Your Clients for Life.
Mitch is co-founder of Lifecenteredplanners.com and developer of the Certified Life Centered Planner program at Texas Tech University. Along with Steve Sanduski, he founded ROL Advisor, a coaching community, and the Retirement Coaching Program that equips planners with the skills to help clients navigate modern retirement.
He is a regular media columnist, a prolific author and the host of the daily radio feature, The Daily Dose, heard on over 100 radio stations in the United States.