Trusted adviser or teacher?

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The argument surrounding financial literacy and its impact on advice has been going on for three years under the guidance of Griffith University associate professor of finance, Mark Brimble.

Every year, final-year students debate whether the financial literacy of consumers has an impact on people seeking advice and the process of giving advice.

Brimble says the important question is, “Where does the planner sit when the client fundamentally doesn’t understand some of the elements of the advice being given to them?”

He says the outcome tends to be twofold:

  1. Some argue that it’s the role of the planner to give the clients that advice and to educate them along the way so that they can make informed decisions
  2. The counterargument is that clients come to advisers for those services and if they become too educated then they won’t need a planner’s help

The University set up the debate to get students thinking about how they would tackle such issues when they’re in the workforce. This year students were leaning towards the first option, but last year students were in favour of the second, says Brimble. There isn’t a right answer, but there should be a middle ground depending on the consumer, he says.

“Some clients take the attitude that they are paying for professional advice and they want the adviser to do their thing and they’re not so interested in the details. While others want to be more involved in what’s going on and need a lot of information and guidance on the opportunities they have in front of them.

“In the middle of that there is a base level of knowledge... What that is, is something that will be debated, and something we need to invest a lot more time in understanding.

“There’s very little research on the impact of financial advice over time; the client’s understanding of that, the client’s understanding of risks their exposed to. Until we conduct that research, we’re just venturing an opinion, and that’s a big issue for the profession to deal with if it wants to become a profession – to build that body of knowledge around the whole advice process.”

Do you think there should be a base level of knowledge? How much should you educate your clients? Share your thoughts below.

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  • Pat on 25/06/2013 12:29:55 PM

    Dr Phods, I am interested in why you feel a preference to debating your advice with clients. Who is the expert in the relationship? Who has done years of study and had years of experience?

  • Dr Phods on 25/06/2013 11:43:46 AM

    I agree with Tony. If my clients eventually feel they no longer need me, I don't mind at all. I actually far prefer to deal with people who have a reasonable understanding and can have a debate with me about the recommendations.

  • Wayne Leggett on 20/06/2013 3:28:08 PM

    Educators? Really? When you go to the doctor, do you ask him to offer suggestions so that you can choose the course of action you wish to take? Or, do you want him to tell you how to get better? There may often be an element of the former, but, by and large, we're after the latter. True, some clients are validators and seek to use us as a "checking mechanism" for their ideas. But, in the main, clients who seek the services of a financial "adviser", want us to do just that. Our job is to impart sufficient information for them to be comfortable with acceptance of our recommendations, not to teach them what we know.

  • Morgan on 20/06/2013 3:10:50 PM

    I'm of the opinion that I go to see other professionals so they can do the job that I can't (e.g. See a doctor to fix a broken back). I don't want to know or be educated on how they fix my back, I just wanted it fixed. I'm therefore of the same opinion of the majority of my clients come to see me to get my expert help, they are not interested in the theory they just trust that I will solve the problems for them.

  • Corey Wastle on 20/06/2013 1:14:07 PM

    We must not lose sight of the fact that client's will ultimately make all the decsions (they should - it's their life savings). Our role is to advise them on what are the most appropriate decisions for them. This inherently creates an obligation to ensure we help them make educated and informed decisions. The more informed they are - the more likely they are to make the correct choices which after all is the aim!

  • Pat on 20/06/2013 10:10:03 AM

    I am of the view that, primarily, we should be trusted advisers. Clients come to us to tell them what to do, the benefits of taking that course of action, possibly an understanding of alternatives, and to help them implement the right course of action.

    Some clients will want education, will want an explanation of why that course of action is best and may want additional detail. But, essentially, we should aim to be the trusted adviser and not the educator. It is what we do, what we have trained for and is the reason our knowledge and time is of value.

  • Rosemary Johnston on 1/07/2013 5:40:19 PM

    As the value of a client's assets increase over time they need to become more sophisticated in their considerations and I would presume this is the role of advisor. Sophisticated investors need a brain's trust to discuss their considerations with a knowledgable expert.

    Using the medical analogy many of us have conditions that are more complex and require us to participate in the discussions of management options. This in no way undermines the expertise of the doctor however it does empower us to be an active participant in our lives.

  • Pat on 26/06/2013 8:08:00 AM

    Thanks for the clarification.

  • Another Mad Planner on 20/06/2013 9:53:16 AM

    100% Agree with you Tony.

  • Tony Bates on 20/06/2013 9:38:04 AM

    I firmly believe one of our key roles is as educators. Its their money and I explain the difference between delagting and abdicating.

    I draw a straight line for every new client, a continuum. At the left hand end is the true DIY client. At the right hand end is the true DI4M (do it for me) client.

    Between these two extremes is DIWM (do it with me) - the advice requirement.

    I then say to all clients that I expect them over time to move along this line. For some with education they will take on more of the work themselves and move to the left. For others with the right checks and balances and trust they will move to the right.

    Both directions are valid and welcome in my business.

  • Peter O'Toole on 20/06/2013 9:59:32 AM

    Good comments Tony. I too see our role as educators which are a continuing process. Some clients really want to delve in to the details others don’t. Some would not want to move too far along Tony’s continuum others will. Constant reminder is also required in many cases as clients can forget previous education attempts as well. I firmly believe that being willing to educate client is one of the ways for clients to understand that they can trust you. I don’t see it as a commercial risk as education usually enables the client to understand the complexities of financial matters. Paraphrasing one client who said - I could do some of what you do, with a little study I could do more, some I can’t do or don’t want to investigate to that depth , in any case I haven’t got time to do any of it.

  • Dr Phods on 25/06/2013 11:58:40 PM

    @Pat. Debate was probably not the best choice of word. What I was getting at is that I far prefer to have intellectual discussions with people, who are knowledgeable and intelligent, but obviously do not have the experience and training that I have. I deplore dealing with clients that stare blankly during meetings because everything is over there heads. I really do not mind when clients say that after years of guidance and mentoring they feel empowered to go it alone. Sometimes they move to a 'special occasion' client when they want to sit down for a refresher or get a second opinion. I started in this career because at heart, I'm a teacher, not a salesman.

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