Ethical, unbiased, and research-backed advisers are like the financial doctors who counsel investors in making prudent investment decisions. They don many hats — as asset manager, financial planner, psychologist, and investment counsellors to service their client’s financial needs.
Unfortunately, advisers encounter several hurdles and overcoming these challenges gets overwhelming to manage.
Here are a couple of key challenges that IFAs encounter on a day-to-day basis in their practice:
1.Dealing with client’s unrealistic expectations:
Setting realistic risk-return expectations from any investment avenue is fundamental as IFAs. Some clients may have unrealistic expectations about investments they make, potential returns, risks involved, and the time it takes to achieve their financial goals. Although it is a difficult task to make clients aware of the market reality, it is important to understand that their expectations stem from worry and fear about their financial future.
Therefore, IFAs must act like a psychologist who can calm their client’s mind. You must clearly communicate what to expect and not, without overpromising or avoiding any issue in the fear of disappointing your client.
The key to managing expectations, especially that may be unattainable, is by demonstrating them consistently the value you provide as their adviser. Continue to remind them, you are their financial partner and your guidance provides them value through expertise. In time, this will ensure in building client’s trust and rectifying any unrealistic expectations.
When you always focus solely on the client’s financial well-being, they will eventually see that you truly have their best interests in mind. Solid financial advice is invaluable.
2. Become a unique solutions provider
In the face of changing dynamics and ever-increasing competition in the industry, be it the easily accessible financial planning tools, robo-advisors, self-help options, big-brand firms, and banks eyeing a share of the pie in the wealth management space, how do you “stand out”, when everyone is claiming to provide the best advice, best service, and offering a delightful experience?
Stand apart from those who claim to have the knowledge and expertise as the one who demonstrates wisdom and ethical practices. Take the time to identify your unique value proposition. Well, one of the quintessential ways is through a judicious approach by providing prudent, unbiased, ethical, and research-back solid advice.
The advice should be customised and personalised to the interests of investor/client and ensuring their hard-earned money is handled with utmost care by recognising their needs, risk profile, investment objectives, financial goals and the time horizon before goals befall.
This approach can help IFAs win the confidence of investors. And if they are handheld with empathy and care, while you render solution-oriented advice in their journey of wealth creation, you can earn the loyalty, respect, and trust of investors/clients. They may even recommend the services to friends and family members and help IFAs build a business on goodwill.
Ultimately, clients will value the advice and make IFAs stand out only if it compensates them well. To do this, it is imperative for IFAs to conduct a need-based analysis, counsel investors prudently, attend workshops, and keep themselves abreast with the latest trends and developments in the industry. Remember, investors will always appreciate the rationale behind the sound advice of an IFA.
3. People not taking you seriously because of the lack of experience
If you’re a new IFA, you may come across several instances when potential clients may not take you as seriously as you would like because of the lack of experience or due to prior experiences of being a victim of unethical advice.
As an independent adviser, you will have to demonstrate that you are an ethical and trustworthy adviser. This means, being prepared with a plan to handle and address all sorts of questions about your credibility, performance ability, or sufficient expertise in the right manner.
The aim is to put your potential client at ease and prove that you are prepared, thoughtful, responsible, trustworthy, and professional. Show them you are the one they can count on for advice on their investment decisions, you put their interests above the rest, and can be trusted with their hard-earned money.
In short, you will have to highlight your ideology that is founded on ethics, the method you adopt while rendering advice, and produce the testimonials of clients. Prospective clients may appreciate this.
At all cost, don’t resort to pushing products. Instead,holistically understand your client’s financial circumstances and maintain the confidentiality of any personal details your client shares with you. Build rapport by improving your clients’ financial health for their blissful future, continue providing after-sales support, suggest worthy alternatives when required, and periodically review their portfolio. You will earn their loyalty as well.
4. Frequent regulatory changes
Staying up-to-date with constantly changing rules takes time. Although the regulatory changes are in the interest of investors, but becoming aware and adhering to these changes, in term of compliance, keeps IFAs busy with paperwork. This, consequently, prevents them from devoting time to research and leads them to retort to unethical practices. They unknowingly offer solutions that may negatively impact an investor’s financial health.
The right thing is to implement efficient time management techniques, such as an activity/task plan, preparation to execute each task, reduce ineffective communication, incorporate changes, and conduct necessary research.
Ensure that you show integrity and adopt the utmost care and diligence. Always provide accurate information to the clients, help them even during rough times, have additional support and backup staff, adhere to your timelines in providing advice to clients, and respond to their queries promptly.
To aptly conclude…
“Trust is one of the most written about and researched topics because many of us have been betrayed,” says David Bedrick, a practising psychologist.
Cultivating trust is a time-taking process. A client looks at a professional as a representative of the industry. Honest ethical advice builds trust and goodwill for IFAs, a favourable reputation for advisers in the industry, which leads to satisfied clients and additional business.
Hence, it is always essential to follow fiduciary standards with integrity and strengthen the client-adviser relationship by placing the investor’s/ client’s interests above your own.
Be a ‘Financial Guardian’ and empathetically address your clients’ financial concerns. Remember, patience is a virtue!