Making sense of data for Financial Planning Businesses - 3 Tips
“Without data you’re just another person with an opinion”
The famous quote from W. Edwards Deming is truer today than it’s ever been. To table a strategic plan to stakeholders that is not supported by data is simply not an option for 2020 and beyond. Yet, the most common statement that is passed on data by most people in the finance world is “That’s interesting”…. with a glazed look.
The challenge we all have is filtering and endless supply of data to what’s important. This comes with challenges as we all have our favourite sources of data and anchor points that give us a starting position. If we find data that suggests things are different to what we may think, it is very easy to jump onto Google and feel safe again after finding data that supports our own point of view.
Below are three tips to get you thinking differently about data and how to feel comfortable when completely immersed in it.
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1 - Finding trends not fads
Good strategist and leaders always focus on the trends and don’t get sucked into the latest fad. This is easy said and not so easily done. We have all seen high profile companies like Kodak completely miss the digital trend. The aim is to follow a trend to the point that it will (most likely) reach the tipping point of ‘no return’ - That is to say, it has reached a point of no turning back to the old world of doing things.
Relating this back to the Financial Planning world, the trend towards only qualified and professional Advisers is not going to stop. It has well and truly gone past the tipping point, despite the best efforts of many major groups looking for reasons to keep things ‘just the way they were’.
Looking through our data, it is clear that many firms are in for a horror few years. The qualification rates among many firms are low, firms with less than 50% of Advisers having a degree is not uncommon. To make matters worse, the groups with the most experienced Advisers also have lowest rates of qualifications.
So now we have reached this tipping point, what does this mean for your business? Succession planning for the practices should be of the highest priority. You need people with the right attitude for being a true professional, not just passing exams. However, with so few new Advisers appearing on the market, this will be a difficult challenge and for many, a bridge too far…. leading to opportunities for those who are up to the challenge.
Let’s look at small ‘single’ Adviser AFSLs - Not quite a trend but too early to call a fad? - We did see a big push by many Advisers to commence their own one person AFSL. This started with great fanfare and many saw this business model as the future. However, it has not yet reached a tipping point.
Closer analysis will show that the move to one person AFSLs has slowed and there are now more closing than there are opening. Closer analysis will also show that this was driven by accountants looking for a way out to do their SMSF work and capture more revenue. The cost and risk involved with being a single Adviser seems to be outweighing the benefits. This creates opportunities for specialist financial advice firms to work with their accounting friends and offer a complete service for their clients.
2 - Don’t run away from the painfully obvious
Financial Advisers are moving away from most major institutions, many have been forced out, others believe the time is right to find an alternate licensee. The question that has to be asked, is ‘Why?’ We know the Royal Commission unearthed some ugly truths about the financial planning world and brought them to the attention of the public.
The public were shown clients that had been duped by smooth talking Advisers driven by greedy executives. This led to conflicted advice and clients buying expensive home brand products that were not appropriate. This dark picture of advice was reinforced by some heavy handed advertising courtesy of the Super Funds.
Trying to readdress the issue with simple slogans, new shiny objects and yet another rebrand was never going to fix this problem. Some groups realised this and got out of the business of advice. Advisers came to realise that the public now had more options and prepared to do their research before selecting an Adviser. Most Advisers believed they needed to upgrade their value proposition and change their business model to survive and prosper.
Hard work was required by financial planning licensees to set an agenda of transparency and giving Advisers the choice of products that would hold up to scrutiny. Some licensees, mostly mid-tier have done this well and are growing their Adviser base, while other groups continue their merry dance with smoke and mirrors.
3 - Don’t look only for data that supports your opinion
As mentioned earlier, it is very easy to go on Google and find data to support your opinion. It’s only natural you would want to see such data, if nothing else, you will sleep a little easier at night.
The best tip is to make sure your team sees the data, and all the data, not the bits you select. Your team should have views and voices of different generations and cultures; they will ask questions you wouldn’t have thought of. They will also be looking for data that supports their opinion and that should be a good thing.
Once the team has had time to digest the data it will make for a robust discussion about the future of the business and how best to approach the new world. This team approach from reading the data to forming opinions will lead to better outcomes.
In summary, it must be remembered that data is just data. It can tell a multitude of stories but ignore it at your own peril. Sometimes the data can be plain ugly, but somewhere, there will be a silver lining - you just have to find it.
