Our response to Alan Kohler’s Money Cafe podcast
Recently, we heard a very interesting perspective on the role of financial advisors; one that suggests the industry is overdue for a thorough shake-up.
This perspective, from financial journalist Alan Kohler, proposes financial advisors should interact with clients the same way doctors do with their patients – quick, in-and-out consultations at $90.00 a pop!
This led to much animated discussion among the TruWealth team. While we’re always open to hearing new viewpoints, we heartily disagree with Alan’s suggested approach because we just don’t believe it’s in the best interest of our clients. The relationship between a financial advisor and a client is nothing like a doctor-patient relationship and requires a totally different model of care. Below, we explain why.
According to Alan Kohler, the financial advice industry needs a health check…
You may be familiar with the Australian financial journalist Alan Kohler, who hosts the popular podcast The Money Cafe.
In the recent episode, Giving Financial Advice a Health Check, Alan is joined by Australian Financial Review columnist James Thompson to discuss the costs involved in visiting a financial advisor.
Alan suggests a more affordable model, where clients simply go along for a quick visit, pay $90.00, and come out the other side with a greater understanding of their financial goals and direction.
We would love nothing more than to solve our client’s problems in a 15-minute visit. But unfortunately, this suggestion doesn’t account for the complexities of a financial advisor’s role.
The ‘symptoms’ we treat are often hidden
When a patient visits a doctor, they usually have some idea of what’s wrong with them. After all, there’s something that’s led them to book an appointment – pain, an injury, a change in physical state or a test result.
When a client comes to see a financial advisor, in most cases there’s a life-changing ‘trigger event’ (a promotion, receipt of inheritance, divorce, impending retirement). They come to us for advice and guidance, but they can’t necessarily explain their symptoms, or what they’re doing ‘wrong’ – it’s up to us as skilled professionals to unravel their story and gain a full understanding of the circumstances that brought them to us.
And the journey to uncover the symptoms can be very complicated
When a doctor assesses a client, they look at the physical condition. They order a blood test and check the results, they take the patient’s blood pressure, they monitor breathing and look inside the ears and throat.
But a financial advisor is more like an investigator.
When a client visits us for the first time, they generally don’t have a full understanding of their financial situation. And that’s ok – we’re here to help with that.
We work with our clients to understand:
what accounts they have
how much money they earn
how much money they spend
how much money they owe on credit cards, on loans, on their mortgage
what their mortgage interest rate is
what assets they (or their partners) have
and what their living expenses are.
The process of getting this information can be lengthy and complicated – often requiring us to communicate with multiple third parties over days or weeks.
Our advice is multi-faceted, and often less straightforward than a doctor’s
In some cases, we can immediately see what a client needs to do. But in the majority of cases, it’s just not that simple or straightforward.
Sometimes, what clients want and what they need are different things.
And other times, clients come to us with no idea of what they need, or we find they need something that’s unrelated to the problem they originally came to us with!
For example, a client might come to us and say ‘I have cash saved up. I want to invest it so it’s not sitting there, earning nothing.’ This is their perceived need, but their actual need might be a little different – they may feel anxious about their level of financial literacy, or they need confirmation that they’re making the right decision, or they feel insecure about their future and they’re worried about running out of money and losing their independence.
It’s our role to guide the client from where they are to where they need to be, but the path is not always clear or linear.
We see ourselves as problem-solvers, and often, we need to do some thorough investigating to uncover the root issue (another way in which we’re more like private investigators than doctors!).
What Alan suggests is far more than a ‘health check’
Indeed, his proposal involves a dramatic restructure of the relationship between a financial advisor and a client, and a significant overhaul of industry compliance requirements.
In order to meet our compliance requirements and deliver the absolute best results to you, we need to know you, your full financial situation, your goals and objectives, your risk profile and complexities.
Once we have all of this information, we prepare a fully compliant and comprehensive financial plan for you. This document is provided to you in a subsequent meeting and it’s known as a Statement of Advice (SoA).
So you can see the healthcare model just doesn’t apply to financial advisors and our clients.
The relationship we build with you takes time and care. It’s closer to that of a medical specialist you see long-term for complex health matters, rather than a GP you visit every now and then for a few minutes.
It’s worth keeping in mind that Alan Kohler is a much respected financial journalist and thought-leader, but he’s not a financial advisor. He doesn’t perform the job we do, face-to-face with clients, day in and day out.
And during the podcast, James Thompson mentions he’s never actually had a financial plan drawn up for him, so perhaps he just doesn’t know what he’s missing!
At TruWealth, we empower single women to take control of their finances and feel financially secure.
If you would like to understand more about your own financial situation, please contact our team on 03 8648 6534 or email at contact@truwealthadvice.com.au for a confidential discussion.