Opinion: What is a good adviser?

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Financial adviser coach Tony Vidler, debates what it means to be a good adviser, and how to demonstrate this to the public:

Recently I came across an interesting graph that highlighted the fact that most consumers cannot tell a good adviser from a bad one.  We have a job to do as individual advisers in differentiating ourselves to begin with, however we also need to consider as a profession, how we portray ourselves to members of the public.

Lifting technical education, and adviser qualifications, and enshrining certain terminology in law, or lifting the fiduciary standards are all excellent and necessary steps on the path to professionalism.

Simultaneously however, there is another issue which is far more fundamental to how we do business.

So here is the damned good advice:  we have to educate the public on what a good adviser is to begin with, because right now they clearly do not know what it is.

Apart from the alarming proportions of consumers who simply cannot tell the difference between good or bad advisers…more stunning is that despite all the regulatory changes and lifting of standards across the entire industry, consumers are actually finding it harder to tell the difference today.

Clearly the lifting of standards and regulatory standards has not made it easier for consumers as yet, though I have no doubt they will do so in time.  So the onus is upon the industry itself to help consumers get a better understanding if we want them to engage with good advisers.

So what IS a good adviser?

Most articles you google will tell you that a good adviser is someone who miraculously negates all potential conflicts of interest and divorcees themselves entirely from bias.

Does that human actually exist?

The mood of the moment globally is that the “good adviser” is one who operates to a fiduciary standard which even our lawmakers do not have to aspire to.  Because it is an easy conclusion to draw, the evolving school of thought is that a good adviser is one who uses a single remuneration method – one must be 100% fee-based.  

As an industry we are leaning far too heavily towards describing a good adviser simply on the grounds of their remuneration method.  Sure we talk about technical competency, and professional designations and duty of care obligations too…but every discussion reverts to the mean: good = fee-based.

Well I have a financial adviser who doesn’t charge me fee’s, and I think she is very good.  I am always 100% aware of what she is making from any engagement, or what she is paid for her on-going advice and service.  I am always 100% aware of her commercial relationships or areas for potential bias.

I am also 100% happy with all of this for a very simple reason:

My good adviser helps me get the results I want.

This isn’t about an investment performance result, as the adviser cannot substantially influence that in my view.  Nor is it about me getting cheap insurance; in fact; my insurance is actually bloody expensive.  What makes my adviser a good adviser is that she spends the time understanding what I want to achieve; is excellent at understanding where the gap is between her competencies and mine; is willing to say the things that need to be said (whether I want to hear them or not); and she remains utterly objective and focussed on my goals, not hers.

A good adviser is in fact a good coach.

A good adviser helps me get the resultsthe adviser doesn’t actually get the results at all.  The adviser helps me work what actions are required for me to take that will most likely lead to the outcomes I want. At the end of the day…I actually have to do the stuff.  I have to play the game.  The coach’s job is to maintain a strategic overview of the game, and then deliver the plan that will get me the win.

As an industry we perhaps need to begin thinking about explaining our purpose, competencies and functions in coaching terms.  The adviser’s designations, remuneration models, business affiliations and philosophies are indeed points of differentiation from other advisers.  It is appropriate to assess hiring an adviser after taking such things into consideration, as different consumers will place different emphasis upon these factors….though over-riding everything is the customers level of trust in the individual adviser.

Perhaps the best way to highlight whether an adviser is good or bad is to focus therefore on two core issues that go to the heart of what most consumers are wanting:

1.  Demonstrable trust (that is; behaviour and actions which reinforce a customers assessment of trustworthiness)

2.  The coaching skills of advisers

Good financial advisers create positive changes in client lives because of their coaching skills, and because clients can trust them with their dreams.

That is a story worth telling, and one which the public at large is willing to listen to.

Tony's blog is available here.

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  • Richard on 12/07/2013 7:05:19 PM

    I have read that a good advisor is one who simply meets the clients objectives. Which seems to be setting the bar very low. A good advisor I feel is one who meets the client's objectives optimally, that is leaving the client with the maximum amount of money. This is usually acheived by minimising tax and maximising benefits, assuming rates of return reflect the client's risk tolerance.

    Why is optimisation so rarely considered?

  • Pat on 12/07/2013 3:37:52 PM

    Greg, you talk about surgeons, but I think it is fanciful to compare what an average adviser does (sell super, insurance and investment products) to what a surgeon does. I have seen a lot of average advisers, I guess by definition, and their bread and butter is selling product. They are not professionals. Nothing fundamentally wrong with selling a product, but don't consider it professional to focus on that and get paid for that.

  • Greg F on 12/07/2013 12:38:28 PM

    Why wasn't this argument put up before FOFA? Can the public tell a good doctor from a bad one? What about lawyers? I am fighting one at the moment over an inflated bill which is simply criminal in my opinion. 'But that is how we charge' is their reply. Large hourly fees broken down into 6 minute units. A unit is charged if a few seconds work is done. A unit is charged to receive an email - not to action it, but to receive it. Do they deduct a unit if they receive a text, take a call, read an unrelated email while working on my file? I doubt it but how would I know? How do I know if the senior partner has drafted a letter or her junior assistant? How would I know? Who polices it? Nobody, that who. We just trust them as they are 'professionals' and they would never take advantage of someone for their own financial gain. And this is the model that is supposed to make us 'respected' and 'above reproach'. Yeah, pull the other one. My clients would much rather see me paid from the products than billing them on some fanciful time based arrangement. Oh, and while I'm at it, there are many 'professions' that make money from selling products. Ever heard of chemists, optomterists or surgeons (yes those parts they put in you don't cost them what they charge you). Its not my opinion that selling a product somehow lowers my credibility or professionalism. Being told it does by a politician makes my blood boil.

  • Rod on 12/07/2013 12:05:33 PM

    Ask Bill Shorten he seems to have the answer to everything !! Not

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