Old Mutual Wealth
Old Mutual Wealth
Is financial planning worth paying for?
Sharon Moller - Financial Planning Coach at Old Mutual Wealth
We believe that true wealth is about more than just money; it’s about living the life you desire. A financial planner can partner with you to make the right choices.
For more information visit:
https://www.oldmutual.co.za/hardquestions
Ian Fraser 00:02
At Old Mutual Wealth, we believe that working with a financial planner is an important step in any individual's financial journey. A financial plan helps you to take control of your future and provides a map to help you achieve your goals. That's why we do everything we can to help you to get the maximum out of the financial planning process, including having the right conversation with your planner.
In this series, we ask and answer some hard questions you should ask your financial planner and some you should definitely ask yourself. We hope listening to these conversations will prompt a richer, meaningful financial conversation with your planner and help you take your wealth further.
Ian Fraser 00:45
Yvonne Kilian on the podcast today, talking financial planning and the emotions that get involved in the way, the behavioural aspects, etc. Yvonne is a Financial Planning Coach, great to have you on the podcast today, Yvonne.
Yvonne Kilian 00:59
Thank you so much, Ian, and welcome to you and the listeners. Looking forward to sharing some insights with you.
Ian Fraser 01:05
So, really, Yvonne, you're responsible for developing and coaching the Old Mutual Wealth Strategic Partner Community. That's a big gig. And with that in mind, the preamble really to this podcast is talking about understanding personal biases. I'd love you to unpack that for a second, because you can't unlink financial planning with those personal biases, can you?
Yvonne Kilian 01:30
Ja, absolutely. Advisers generally experience exactly what clients are experiencing and external factors impact them as much as it does clients. And that may impact how they respond in any given situation. So, it's just really to also be aware of what that means for them.
Ian Fraser 01:50
Let's talk about those behavioural characteristics and the different aspects that get in the way of providing relevant financial advice, the solid advice that you sometimes have to look through the emotions and get to. How does that work?
Yvonne Kilian 02:03
I think I really want to maybe focus on three key areas that does impact impartiality and objectivity when advisers deliver advice. I mean, from a behavioural bias perspective, if you look at the spectrum of all the biases that are out there, there are just too many to mention. It's over 1,000 biases! And we're not going to have time to unpack that. But generally, just looking through on what are those aspects that does impact and that can potentially lead to compromised advice to clients.
The first for me would be just really who planners are. They've got an altruistic nature, they serve others, and they spend so much of their time and effort in doing that for others and serving others. And that has a direct impact on their emotional and mental wellbeing. So, they tend to give just about all of themselves without taking care of their own needs. And for me, this can potentially impact their ability to be objective and impartial when they give advice.
So, coupled with that, when we talk about behavioural bias, it stems from really how do they see the world, what are their habit-forming behaviours, and how is this influenced... - and it has been influenced, not just by their past experience and beliefs, but also their motivations and the fears. And that has a direct impact. And I think coupled with that, for advisers to be aware of how their views and behaviours can get in the way of providing objective advice. For many it's a blind spot, especially when they experience periods of disruption or stress.
And then I think the last area that I wanted to talk to here, is that of the environmental and external influences that really lead to advisers struggling to always stay relevant and up to date in an ever-changing environment. Where they have to be cognizant, not just of what's happening in the present, but also what's coming in the future. And my view is that advisers are impacted by these external factors. And it really does contribute to how they live their lives and how they advise their clients. So, they are required to continuously develop their skills in order to stay relevant.
And, ja, so what I've seen is that they really struggle to adapt, and to stay innovative and to reinvent themselves with these new ways of doing. So, the environment does demand it, but it's always easy to stick with what we know. We've always done it this way. So, ja, I think for me, about helping advisors to connect with and understand the impact of what change brings and what it means for them. That helps them to better optimize on opportunities. And it can help them to sustain a competitive advantage to provide optimal services to their clients.
Ian Fraser 05:23
I mean, Yvonne, this... just listening to you talk and understanding what the role is of a financial planner, the responsibility is absolutely massive. I mean, you're dealing with other people's futures, you're dealing with other people's hopes, dreams, plans, etc. And you know, here you're talking about being able to roll with the punches, change your outlook, educate yourself; it really emphasizes to me how important it is to be able to find somebody that you can honestly trust to be a financial planner, and then ask the right questions.
Because, you know, a lot of us aren't equipped to ask those questions. We don't know where to start, we set ourselves in front of somebody who claims to be a financial planner, and we listen, you know, with the best intentions, and sometimes that advice can be fairly difficult to digest, and sometimes it can be wrong as well. So, I'm going to ask you maybe to unpack for us what the questions are that we should be asking to this incredibly important person in our financial future?
Yvonne Kilian 06:28
Ja, I think that certainly questions are the means toward developing some understanding of who it is that you will be dealing with as a client. It also helps you to gauge whether your financial adviser is able to provide you with a balanced view when they work with you. So, clients that are concerned with how their advisers are dealing with their own stresses, mental and emotional well-being, can check in and ask questions like, what and how do you manage your finances during these times? They could even ask their adviser whether they engage any support when they have to make difficult decisions, including financial decisions, for themselves.
And I think one of the most important things that comes out of studies that we have done, is most financial advisers in the broader community do not have a financial plan for themselves. In fact, very few have a financial plan. And, you know, it's just inquiring into, so, do you have a financial plan? Or do you invest in the same investments and products? Or do you employ the same services that you offer to me for yourself? Just those kinds of questions will give you a good insight into where they're at from an emotional and mental point of view.
But, ja, I think I can maybe go into a couple of other questions that really gauges objectivity of: how will your adviser respond in specific situations? Always good to know to ask, so, if money is lost, how would you manage my assets? Their advisor. Or, how would you respond when expectations are compromised after the financial plan is formulated, for instance. That's another example. So, I can go into a couple of others. But ultimately, you know, what strategy is that your adviser employs, also for them to stay relevant, and, you know, in a changing world, and how can they relate that back to how they deliver advice, how they run their businesses, and also how they manage their own situation, and their own stresses?
Ian Fraser 08:50
Certainly, as a client, I'd be fairly nervous to ask my financial planner. It's almost as though you're questioning what their decisions are and basing yours on that. But I suppose it's a very relevant thing to do. Because if they certainly can't answer those questions, and manage their own portfolio, then how the heck are they going to be managing yours? I mean, that's the conclusion I'm drawing.
Yvonne Kilian 09:12
Ja, and I think leading on from that, it's about managing expectations, as you've mentioned, rightly so. So, where does the responsibility lie for providing objective financial advice, and who is accountable for making sure that whatever is decided is followed through? And in essence, the responsibility lies with the client and the accountability partner is the adviser to make sure that you stay on track with what you committed to do in the first place.
Ian Fraser 09:44
The value that is there for a client, when planners provide this objective and impartial advice, they've got a solid background, they've given good advice. The value of that is truly tremendous. Let's dip into that for a second. What are the benefits then? What is that value?
Yvonne Kilian 10:00
I think there's five key value drivers that I can pull out here, and it's not an explicit list. But ultimately, for the client, it's an immediate call to action to collaborate with an adviser in an impartial way. Because they will immediately have a sense of what they need to do. And they will also have someone that can walk alongside them, to empower them, to have the confidence to start and to stick with taking the necessary steps in order to achieve their financial objectives. So that's the one area.
And then of course, having a trusted relationship for the long term, and one that lasts, and also one that allows for some flexibility where the client and the adviser will adapt because of changing circumstances or the environment. And doing so without really compromising the purpose of living a positive and fulfilled financial future life.
And, of course, I mentioned about managing expectations, that role of responsibility and accountability. But it's sharing knowledge between the two parties, be it the client or the adviser. And that knowledge and expertise is an objective way within a framework where the client can then consider the trade-offs and make informed decisions. That's a very highly regarded value driver for me, that comes out of that collaborative relationship. So, it's not a one-sided telling and solving of your situation in a specific moment. It looks at things in a much broader way, and therein it's an engagement with which clients can really experience what it means to enable a positive shift for them today. So, that invitation of collaboration with your financial adviser is that they will coach you, they'll become a bit of a thinking partner, and they'll challenge your views in order to create some form of clarity around those choices, those important choices that you need to make.
And again, that technical expertise, that specialised knowledge of financial advice and products and services. These really are the enablers that will support you to achieve your objectives. But it's the conversation and the collaboration in the formulation of the plan that really adds most of the value if it comes from a point of understanding who you are as a client. So, ja, I think that that basically highlights most of the value drivers that clients can experience.
Ian Fraser 12:51
Ja, I'm hearing communication, communication, communication...
Yvonne Kilian 12:55
And collaboration.
Ian Fraser 12:56
Yes.
Yvonne Kilian 12:57
It's a dialogue, it's not a monologue.
Ian Fraser 13:01
I'm gonna play devil's advocate here for a second, let's switch roles and let's talk about clients. The end user, the person who's been given the advice, what happens when they get in the way? Because we've spoken about, you know, behavioural aspects, we've spoken about emotions. We've spoken about somebody around the braai who might get advice from a friend and then approach their financial adviser. And so, it goes, and you know, we might get in the way of this process. What do you have to say about that?
Yvonne Kilian 13:28
Firstly, what gets in the way is who you are and how you respond in a given situation. And most of that we're blind to. So, the only way you really know what your reaction is to a triggered event, be it a political event, be it a technological enhancement that you need to adapt to, because you haven't done it before, you will react in a certain way. And that's driven by the underlying experiences of what your life has been like up to now, as well as your personality traits and characteristics. And that determines how you behave in any given situation.
So, behaviours are the norms that we project out into the world. And it's a form of defense mechanism. But that is the portion that we can change. The things we can't really change is what's not visible. It's what sits under the surface, it's your beliefs and your morals, your worldview, how you perceive the world. But ultimately, the things that can be changed are the habits and the behaviours in how you will respond. And those behaviours, if they don't serve you, and they're toxic for you, the invitation is how can I develop the competency and the skills to try doing something differently? What are those first little steps that can help me do that?
Ian Fraser 15:09
That was not the answer that I was expecting... you're ending up doing a lot of introspective thinking and a lot of introspective work to be able to better your outcome when it comes to financial planning. That's very interesting. There's a whole other conversation happening there with that answer, isn't there?
Yvonne Kilian 15:27
There absolutely is. And this is exactly why we believe that equipping financial advisers with the softer skills, where it's no longer just focused on IQ, but EQ as well. It becomes increasingly important so that they can meet clients where they're at. And also make clients aware of what gets in the way and empower clients to shift so that they can liberate themselves from what's been holding them back up to now.
Ian Fraser 15:53
Fantastic. What a nice conversation, interesting points that you've raised there. Thank you so much. I think it's certainly food for thought for me and hopefully everyone else listening to go away and digest. Yvonne Killian, the Financial Planning Coach, or one of the Financial Planning Coaches at Old Mutual Wealth. Thank you so much for your time today on the podcast. It's been a great pleasure to chat to you.
Yvonne Kilian 16:16
Thank you for having me, Ian.
Ian Fraser 16:19
The key to any successful financial plan lies in receiving good financial advice. At Old Mutual Wealth, we work with financial planners that know this and truly partner with you to help you make the right choices. If you don't have a financial planner, choosing one may well be the most important step you take. Visit us at oldmutual.co.za/hardquestions