When Clients Are Wrong
Feb 03, 2019
Recently I've had a few advisers get calls from angry disengaged clients who have been "inspired" by this Royal Commission of ours. Many of them have been clients for years, and in that time haven't responded to emails, offers of review, or anything.
Now though they're calling up, indignant.
They've read the Royal Commission news, they've heard about all the terrible stories and they want to know, "How much money have you taken from me? What services have I received?"
Let's break this into two.
Not Getting What You Paid For
Firstly, there are some clients out there who signed up to receive a service package in return for fees paid.
If these clients paid for that service - the review, the active management, the communication - and haven't received it. It's pretty simple. They need to get a refund.
Bottom line is if I promise to do something for somebody and they paid me and I didn't do it, I have not kept up my end of the bargain.
If I pay my personal trainer and I do every single exercise and follow every single diet, then I deserve that money back if I don't get results.
However, if I pay my personal trainer and I decide not to turn up for the lessons, not to follow the eating plan and I don't get the results...
...well, that's kinda different, right?
The big question I have with that is how long my personal trainer would allow that to continue before they called me on it. If the answer is never, then I'd suggest the responsibility lies with the personal trainer for not keeping me accountable, with a little bit of me for being stupid about it.
However, I'm not talking about a personal trainer situation here. I'm talking about those clients who signed up for advice many, many years ago, long before FOFA came around, long before commissions were abandoned, and long before fee for no advice.
These clients are different to me, and they belong to a different world in most cases.
Many of these clients took advice at a time where they didn't pay for it. In other words, they paid $0 for the advice they received.
How did this happen? How could any business commercially afford to give what they do, all their expertise, their time away for free unless they get paid?
How We Got Here
Once upon a time, clients didn't pay directly for advice. Back then the payment for services came from the product that the client was put into.
As we know, there were two parts; there was an upfront payment and there was an ongoing trail.
And why was it done like that? Well, we have to go back further to see that answer.
See, advisers before we now know them now once mostly worked for the companies who made those financial products. They were paid a salary.
Then one day those companies realised they didn't want to have those fixed salary costs on their books and came up with an ingenious way of getting rid of that expense, offering these motivated, capable people a reason to become "self-employed"
Any self-employed person usually wants two things
1. new revenue, and
2. a stable ongoing income.
If you don't have a stable ongoing income source, it makes it really hard to invest in your business. You're always chasing security.
The aim of most business owners isn't just income. The big aim is to build something that generates passive, ongoing revenue.
And that's what happened.
Trail books of this revenue - generated from the ongoing commissions paid by the companies who no longer wanted to pay wages - started to be traded on a secondary market, as most passive/ profitable income sources eventually are.
People bought and sold these books, so suddenly you might have been a client of one adviser, only to discover that you're with someone else (if you even took an interest, given the only fees you were actually paying were to the people who actually made the financial product).
By the way, this isn't unique. If I take out a software subscription and Microsoft buy out that company, my money now goes to Microsoft. I don't write Microsoft a big angry letter asking them who the hell they are and why they're now looking after my software product, because I understand inherently that the business has now been sold.
Note: I'm staying away from the conflicts because frankly, just because there's a conflicted remuneration structure, that doesn't mean that someone's advice is conflicted. There are many good people out there who will naturally and ethically put the interests of clients ahead of their own. As David Murray (incoming AMP CEO - good luck - said, "You can't legislate for ethics") and just because one adviser is bad, the insistence that every adviser can't be trusted to be good is not only flawed but frankly at times discriminatory.
If you looked at some of the phrases used in the media and replaced the word "financial planner" with any other ethnic minority, well, try it and see how long it would take before accusations of bigotry, racism or xenophobia cropped up.
If you're wondering how that feels to be an adviser having done the right thing to be told that you are scum, I can tell you not very nice.
Let's get back to the point.
Dealing with "that" call
Some advisers here are getting calls from these angry clients.
If this is you my suggestion, and this is the question I've been taking, is treat them as inquiries.
It's easy to get defensive. Your second contact should always be to get on the phone, to try and explore their situation.
"Thanks for speaking with me. You sound angry so I'd like to help. So just give me an understanding. When did you initially get advice? Who provided the advice? What was the basis of your agreement at that point? Do you remember if you paid a fee? Do you remember if you've received emails or communications from us? Have you ever taken us up on the review? What would you like me to do for you? What would you like to get out of this?"
You notice it's all questions. I'm trying deliberately to serve and understand the client, and this is key to diffusing what could potentially turn into a complaint, but isn't yet.
Next, go away and agree to come back after looking to the client's situation.
If it's true, they signed up for something and you've not been providing, you better notify your licensee. You haven't kept up your end of the bargain.
However, if the truth is that there's a client there who didn't pay for advice, signed up for exactly what they've got and haven't responded to a single email on the way, I would suggest that this is not for you to feel bad.
This is an opportunity.
"I've had a look at your situation. I can see that you got advice at this point. This was what the basis of what was agreed. We've sent out communications but have never heard back, and from what I'm seeing, the package that you signed up for, the way that you were working with your adviser is exactly what's happened over the last few years.
But I don't want you to feel like you're not getting supported. So the way that you've been serviced so far, the advice that you got has changed a lot. I'd like the opportunity to sit down with you, talk you through it and analyze where you're at, where you started from, where you want to get, and if at the end of that appointment, if everything's on track I'm happy to end our relationship and try and find the best way forward.
Alternatively, if you feel that there's something we can help with, I'll outline what I think we might be able to do and help with, and we'll look at the fees you paid over the last few years and offset what we can against any fees for work you may need to be done to keep moving forward.
Would that seem fair to you? I'm keen to show you that advice has changed and the way we work isn't what you may have been reading about"
It's easy to buy into the press's crusade against "evil", to think that all things are bad, but the truth is advice has changed.
The way that people pay for advice has changed. It's better, but that doesn't necessarily mean everything that came before is bad.
If you are getting inquiries from clients, firstly, please don't let it get you down. It's easy to think this is the end of the world, but it's not.
This is the beginning of what will end up being an incredible future.
In the meantime, hold tight. Recognize that right here, right now there are going to be angry clients, but some of that anger is unjustified and in response to cage rattling, which isn't true in every case.
This is also an opportunity to help people understand that advice is different and how it can add value.