In this, in her latest blog for IFA Magazine, Katie Brinsden (pictured), Managing Director at the national, directly- authorised IFA, Truly Independent, delves into another yet one of those topics she feels so passionate about. This month, Katie reminds us why it’s so important for advisers to genuinely help clients on their financial journey by being honest and helping to make sure that they avoid unpleasant surprises as they go along.
Expectation management is vital to the satisfactory delivery of any product or service. Why, then, does it often seem to take a back seat where building a secure financial future is concerned?
This is not to say some advisers are deliberately disingenuous in their dealings with clients. They are not going out of their way to deceive or delude. But are they managing expectations in a way that encourages a necessary sense of realism and responsibility?
By way of illustration, let me briefly draw a parallel with another industry – the motor trade. Believe it or not, that was my stomping ground before I entered the wonderful world of financial advice. I got my first job at a dealership straight after leaving school and worked my way up from there.
It hardly need be said that people who buy cars should be given absolutely no grounds for complaint or disappointment. We are talking about expensive purchases, after all. So managing customers’ expectations, sure enough, was a key element of our team’s job.
We would have been foolish to assert, for instance, that our latest model was faster than something costing twice the price. Having discovered this was untrue, an owner would have every right to feel cheated and annoyed.
Similarly, it would have been ridiculous to suggest a car with a highly tuned engine could easily clock up a hundred miles per gallon. Again, experience would soon lead a customer to a very different conclusion.
You might think these are wildly exaggerated examples – and you would be right. But let me ask you this: would equally inflated claims around performance and cost-effectiveness be so out of place in the financial advice arena?
One of the fundamental issues here is that times have moved on. The age of “easy money” – as the period from the end of the global financial crisis to the advent of the COVID-19 pandemic is now referred to – is undoubtedly over.
This means saving is harder now than it was for many years. By extension, it also means saving is precisely what most people – that is, those who are not already conspicuously wealthy – should be persuaded to prioritise.
In tandem, it is crucial to acknowledge some individuals have a pretty basic grasp of how to get the most out of their money in any event. In particular, they do not appreciate the finer nuances of risk and reward.
They should not be criticised for this. It is just a fact of life. But the result is frequently that they favour a short-term view, spend rather than invest and continue to amass liabilities instead of accumulating assets.
This would be questionable even in an environment of relative economic and political calm. Today, in the face of ongoing uncertainty, it has to be clearly flagged as less than prudent – if not downright reckless.
The adviser community has a huge part to play in countering this kind of shortsightedness. Perhaps more significantly, we have a duty to do so. We have to make plain that the expectations on which such an outlook is based may be dangerously unrealistic.
So how do we do it? How do we preach pragmatism without making clients feel they are somehow getting a raw deal? The answer is much the same in any industry: be straightforward, be transparent and strive to work with clients to understand what they really need.
We can quickly head back to the showroom to see how this pans out in another setting. How would you respond if a customer with only a passing knowledge of cars were to wander in and express an interest in a top-of-the-line coupé?
You would not deny it is a beautiful car. You would highlight what it does well. But you would not imply it is so mind-blowingly extraordinary that all other vehicles are rendered puny by comparison – and neither would you tout is as a perfect family runabout or the weapon of choice for a trundle to the shops.
By the same token, advisers might usefully devote more time to discussing what truly matters. That means dialling down the focus on considerations that are of strictly limited relevance to a huge number of clients.
Case in point: why drone on about the intricacies of portfolio construction, the potential outperformance of this or that fund and the distant prospect of sensational returns? For many clients it would be far more helpful to explain the importance of sensible goals, incremental targets and steady progress.
You may think such a prosaic, grounded, unspectacular approach would generate little enthusiasm. In the long run, though, it should earn trust and respect – because a life-long financial journey, just like a ride in a new car, should be free from unpleasant surprises.
Katie Brinsden is Managing Director of Truly Independent.
