Posted on 11/17/2002 1:26:34 AM PST by FairOpinion
WHEN was the last time you asked your financial adviser to join you at a family function? If the answer is "never", you are not alone.
Weddings, birthdays and even the backyard BBQ are normally reserved for friends with whom you have some sort of relationship or bond and can talk comfortably on a range of subjects. With the stock market a depressing reminder that most investments are going backwards, and superannuation a conversation-stopper at the best of times, the person who tells you where to put your money might not be someone you'd normally socialise with.
Moreover, dismal returns of investment funds - which may have been the recommendation of your adviser - might make them the last person you want to show off to your friends.
But all that might be about to change.
After years of providing people with a financial solutions based purely on a person's goals given in an initial briefing session, financial advisers are trying to learn more about their clients and their families.
Looking beyond the legal requirements of "know your client", advisers are increasingly getting on board an industry trend of lifestyle financial planning. That is, helping clients organise their financial goals around the sort of lifestyle they want.
Rather than pull out a plan based on a financial model, advisers are being encouraged to put the client's face on their money. To do this they are learning to communicate with their clients.
Lifestyle financial planning is so much the buzz that the Financial Planning Association is focusing this month's annual convention on the topic.
Program chair of the convention and principal of Sydney-based Wealthadvice, Marisa Broome, says the theme is being driven by the clients of financial planners who increasingly want a technically appropriate financial solution that doesn't compromise their lifestyle.
"It's a more holistic approach. It's about balancing your life with your business and home life and your health."
To do it properly, advisers need to form closer relationships with their clients, with better communication and a better understanding of their wants and needs.
Just as the negative returns for many investors are prompting clients to wonder why they need an adviser at all, advisers are thinking of new ways to keep their clients interested.
"I know if I give a client a technically appropriate plan based only on their goals I probably won't keep them as a client," Broome says.
She says it's important to get inside the lives of her clients and to form strong relationships with many of them in order to meet their financial and lifestyle goals.
"I know a lot about them. I know more about them than some of their families. I go and visit clients when they have babies - I am that close," she says.
Director and national head of ipac Financial Planning, Sally Manion, says lifestyle planning involves a trade-off between all the things we want to do and achieve, and that clients should be prepared to pay for the service.
"Regrettably, most of us can't do all the things we want," she says.
Take a client whose life goal is to travel overseas to visit family each year. Knowing that's what they want, an adviser can put together a plan to help them achieve that goal - but it will probably mean they have to save more or invest more aggressively. Life planning takes into account how important the trip is to a client and then what they are prepared to do to achieve it.
Manion estimates that 50 per cent of Australian adults have had a financial plan prepared and that most of those would sit on the shelf.
"If it's in the context of lifestyle you have got to keep it up to date - otherwise the fee paid for the initial plan is wasted. You buy a car but you don't get value out of it unless you maintain it," she says.
Where an initial financial plan might cost $250-$500 to prepare, an ongoing health check is usually charged as a percentage of the investments with the adviser.
Where an adviser charges on a fee-for-service basis the rates might be scaled downwards from 2 per cent for the first $300,000. Other advisers might charge an hourly rate.
RESEARCH conducted here and in the United States shows that large numbers of people who use advisers don't think they are getting value for money.
US-based Financial Psychology Corporation (FPC) and Investment Advisor conducted a survey of advisers in the US - and at the same time FPC conducted a mirror study of individual investors. It left little doubt that individual investors were not very satisfied with the service provided.
Yet 71 per cent of advisers believed their clients were content with their investment management performance and communication skills, and 39 per cent thought their clients believed they were getting good value with their money management services.
On the other hand, 40 per cent of consumers answered an emphatic "no" when asked if they were getting good value for their money management. Only 6 per cent of advisers exceeded the consumers' expectations, and 57 per cent fell short.
The chief executive of FPC, Kathleen Gurney, says advisers feel more confident about the financial information they deliver - which is why little time may be spent on asking questions about a person's family or interests and listening for answers.
"When people don't feel confident they take up that time with what they feel comfortable with and that is, 'Let me tell you about how smart I am and what I know and what I can help you with in that arena'. They are not given the communication skills to the extent they should be," says Gurney.
Perpetual's general manager of advisers, Damian Crowley, says it is surprising how important communication is to clients - yet many advisers still fail to understand this.
"Often advisers have different skills which they have focussed on, like technical and education, but not people skills. Good advisers are building in communication and tailoring their fact-finds," Crowley says.
What this means is that on top of the questions you might get when you go to an adviser for the first time - such as your personal details and how much you want to live off in retirement - they will ask a lot more about your interests and values and what's important to you in terms of your family, work and health.
Advisers within the Retireinvest network are also being encouraged to learn more about a client's lifestyle and personal goals when it comes to mapping out their financial goals and requirements.
"We see a real value in our customers understanding the lifestyle they aspire to and the balance they need in their life to achieve that goal. The financial aspects are an enabler to a better lifestyle," says Retireinvest's national marketing manager, Lynne Wyatt.
"If you don't understand what is important to you in terms of your health and family, etcetera, then you may end up very wealthy but very unhappy," she says.
Wyatt says more and more companies are providing tools to assist their advisers to understand the relationship of life balance to lifestyle financial planning.
This report appears on news.com.au.
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