Historically, most financial advisers including myself were trained to be financial gap finders and fillers – if the (decent) fact find highlighted the client had 5 products then there were still 5 they didn’t have (or perhaps the current 5 could be improved upon?) The end result of that approach was that the client ended up with a suite of possibly decent financial products. No harm done? All compliant (well, usually if we ‘forget’ the duff products often foisted on us by the manufacturers).
The BIG opportunities this ‘gap finding’ approach missed (and continues to miss) were helping the client get the right answers to the BIG questions such as ‘how much is enough for me to be financially independent? What do I need to do to ensure my family never runs out of money – no matter what happens? What do I exactly need to earn, save and/or sell my business for so work becomes a choice?
Without the proper planning Paul describes there is the danger a client can have all the assets going and yet not get/lead the life they deserve – they could and up working instead of playing (doing the things they love). They could be taking investment risk when none is required. Am sure there are many such instances out there.
As in industry, our challenge is how we articulate this proper lifestyle finacial planning approach to the clients and charge for it. There should be a queue around the block – but there isn’t. Yet, within yards of where I sit, there are IFAs claiming on their website that they pick only the winning funds and that is why clients stay (well, really) and charging 1% plus VAT on AUM for in effect not a lot.
The real challenge lies in articulating what real lifestyle financial planning is and how it will benefit the end user – the client.
There will be those that can turn a profit through the old approach of churning product, meeting the immediate need and financial gap filling – but they have missed the point. Their clients could end up missing the boat.