A survey of Australian financial advisers by XY25 provides a deep dive into the nature of conversations advisers have with their clients and examines adviser perceptions of the non-financial impact they have made on their clients’ lives.
On average, Australian advisers spend 45% of their time with their clients talking about non-financial personal issues .
Percentage of clients raising issue
Advisers were asked about the impact these conversations had on their clients.
94% of advisers expect their role as coach and counsellor to increase in importance
It is abundantly clear that financial advisers provide more than just financial expertise. For the majority of clients, the adviser is also a mentor, counsellor and mediator, providing support as their clients live out the human drama of day-to-day life.
Advisers are therefore already well positioned to more formally offering coaching as a service. And the consumer demand is clear.
For advisers considering this path, there are a number of considerations, including how advice processes may need to change, how to charge clients for coaching, and skills and training requirements.
How would a coaching based advice process compare with a standard advice process?
A Griffith University Study26on financial coaching compared the standard six step planning oriented advice process with a coaching oriented process, as shown below.
Adviser attends to initial compliance; builds rapport; provide process overview and sets the terms of engagement.
Client agrees (or not) to proceed and signs terms of engagement.
Adviser attends to initial compliance; builds rapport; provides process overview and sets the terms of engagement.
Client commits to actions for change and signs terms of engagement.
Adviser completes fact finding including:
Identifying finanical goals,
Assesses financial capacity i.e. cashflow,
Assesses threats to the financial plan, and
Surveys client for risk tolerance.
Client hands-over finanical data and responds
to risk tolerance survey
Adviser assesses financial literacy in relation to
Educates on benefits of effective budgeting /
Provides cashflow analysis toolset, and
Identifies and discusses client’s wealth potential.
Client completes budget and identifies:-
financial goals and behaviours; knowledge gaps and other threats to wealth creation
Adviser researches strategy and product to support attainment of client’s financial objectives; selects best option as the basis for the financial plan.
Client waits for adviser’s response.
Adviser engages client in:-
collaborative S.W.O.T analysis of financial objectives and opportunities, education pathways to develop financial literacy, capability and informed expectation of risk,
Client commits to education pathway and to reducing controllable risks to their wealth creation i.e. overspending
Adviser documents and presents recommendations in the SoA.
Client acknowledges understanding of the advice and agrees (or not) to proceed.
Adviser continues to coach client towards wealth creation and reinforces accountability.
Adviser prepares SoA and checklist detailing advice and tasks to complete for next session.
Client updates financial analysis tools; engages in progress evaluation and commits to next instalment of wealth creation tasks.
Adviser processes financial product application paperwork and schedules review meeting.
Client co-signs applications and agrees to review schedule.
Adviser coaching continues; knowledge gaps continue to be filled and support scheduled according to client’s need.
Adviser maintains client motivation with consistent and regular communication.
Client completes assigned tasks and records progress.
Adviser evaluates actuals to the plan and identifies changes to previous recommendations.
Client confirms changes.
Adviser coaching sessions scheduled every 2 months.
Client continues to record progress; addressing commitment and any issues affecting progress
Of course, if coaching doesn’t involve any personal advice (and often it doesn’t need to), then the process can be much simpler and more cost effective.
XY Survey of Australian Financial Advisers, August 2020.
The Financial Coaching Advice Model: An exploration into how it satisfies expectations of quality advice, J. Knutsen and R. Cameron, Griffith University, Australasian Accounting, Business and Finance Journal, Volume 6, Issue 4, 2012.