Do clients want financial planners to adopt a coaching approach?

The answer seems to depend on how the question is asked- by Rob Macdonald

I do a lot of work with financial planners who wish to adopt a coaching approach in their engagement with clients. Much of this time is spent on developing the skills to ask clients meaningful and appropriate questions.

But Morningstar research in 2018 found that clients do not value a coaching approach. In the research, clients were asked to rank 15 benefits of working with a financial advisor. Top of the list was “helps me reach my financial goals”, followed by “can help me maximise my returns” and “have the relevant skills and knowledge”. In the bottom third of the list were “acts as a coach/mentor to keep me on track” and “helps me avoid behavioural mistakes”, suggesting that a coaching approach was not valued by clients.

clients are arguably expressing the need for a coaching approach, the core of which is to help clients find their own answers to their own questions.

Morningstar’s 2018 research presented a dilemma to financial planners: is there any point in adopting a coaching approach if clients don’t value it? This was particularly pertinent to me, as in 2018 I was involved, on behalf of Allan Gray, in developing and facilitating the first behavioural coaching programme for financial planners in South Africa.

In contrast to Morningstar’s findings, Vanguard (2016) and Russell Investments (2021) quantified that half the value of a financial advisor was in behavioural coaching.

Roll onto 2024 and Morningstar again asked investors to rank what they valued about financial advisors. The top three benefits were the same and the coaching-related items remained in the bottom third. While some experts are advocating for a coaching approach to financial planning, the clients are saying they don’t need it. How does one handle this disconnect? Morningstar has explored the disconnect in two separate studies.

In 2021 and 2022, Morningstar surveyed clients to give reasons why they hired or have an advisor. In this way, they got clients to express what they value in an advisor in their own words, which Morningstar suggests describes the “root of what clients value in a financial advisor”.

Four terms dominated the responses. “Getting comfort handling their finances,” and “behavioural coaching” related to a coaching approach. Technical expertise was also valued, with “quality financial advice” and “help with specific financial problems” the other two most common terms clients used.

In a 2024 study, instead of getting clients to rank a list of benefits, the researchers asked clients what they would be “willing to pay” for a particular advisory service. In response, the most valued service was “to help brainstorm and identify financial goals”, followed by “to help review your existing accounts and financial behaviour and provide personalised recommendations”.

By responding to a different question, what clients value most shifted from achieving goals to getting help to generate goals. In acknowledging advisors can help them do this, clients are arguably expressing the need for a coaching approach, the core of which is to help clients find their own answers to their own questions. Similarly, asking for a review of “financial behaviour” sits in the coaching domain. This “willingness to pay” study showed that aspects of a coaching approach are significantly more valued than when using the “ranking of benefits” methodology. It also reiterated the importance of an advisor’s technical expertise, with “evaluates research on investment options” third on the “willingness to pay” scale.

Morningstar’s multi-pronged approach to their research suggests that the way we ask questions matters, a core premise of the coaching approach. Clients ranking benefits versus describing what they value in their own words or expressing a willingness to pay produced very different results. Despite the apparent contradictions, it would seem the research confirms that clients value a coaching approach balanced with a financial planner’s technical expertise.

References

• Kinniry, Francis M., Jr., Colleen M. Jaconetti, Michael A. DiJoseph, Yan Zilbering, and Donald G. Bennyhoff, Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha®. Valley Forge, Pa.: The Vanguard Group, 2016.
• Lamas, Samantha; Labotka, Danielle; and Murphy Ryan O., Understanding What Investors Value in a Financial Advisor, Morningstar Behavioural Research Insights, August 2024.
• Russel Investments, 2021 Value of an Advisor Study.

BC Article link: https://bluechipdigital.co.za/newsletter/do-clients-want-financial-planners-to-adopt-a-coaching-approach/

Ebook link: https://webkiosk.globalafricanetwork.com/blue-chip-issue-93/69013056/24

Building emotional resilience in challenging times

Building emotional resilience in challenging times- by Kim Potgieter CFP®, Director, Chartered Wealth Solutions, ICF Professional Certified Coach, New Money Story® Mentor Coach, Certified Dare to Lead™ Facilitator

Since 2020, our conversations with clients have become increasingly challenging as they navigate various fears, experience high levels of stress and anxiety, and constantly face factors beyond their control. In South Africa, the prospect of policy shifts, changes in leadership, inflation, interest rates and questions about the independence of institutions all contribute to a climate of uncertainty, further exacerbated by international trends and global turmoil.

Personal challenges and life transitions

In addition to these macroeconomic factors, we often deal with clients facing significant personal challenges. Many of us spend years guiding the same clients, and the transitions and unforeseen events they face are becoming ever more complex. Fears of running out of money and traumatic life transitions such as death, divorce, relocation, losing children or losing jobs add layers of emotional complexity to our work.

These personal challenges require us to offer empathetic support and practical guidance to help clients navigate their financial journeys. The truth is, we are more than investors, planners and advisors; we are coaches. As much as we embrace the skill sets of empathy, guiding our clients through deeply vulnerable topics often involving emotions such as shame, fear, sadness and regret, these challenging conversations can take an emotional toll on planners. How are we, as planners, managing our emotional wellbeing?

The challenge of difficult conversations

Just this year, I’ve experienced many extremely challenging conversations with some of my clients – the most traumatic being guiding clients through the death of loved ones. Liz sat in a meeting room with me reliving the trauma of her husband’s brutal murder. How does one gently hold a client in this space and still have to talk about the practicalities of wrapping up the estate and restructuring the financial plan? It’s impossible not to feel the deep sorrow yourself.

Another client, Gabriella, inherited a substantial sum from her husband, who died young. They shared a deep connection, and his death turned her entire world upside down. Gabriella felt extremely guilty for being the survivor, guilty about the large inheritance and struggled with profound feelings of isolation, disconnection and anxiety about suddenly being responsible for the financial decisions. How do you help a young widow honour a legacy with grace and wisdom without being deeply affected by her story?

Guiding clients who do not have enough money to sustain them through retirement is another tough part of our role. David, one of my clients, had a business exporting bespoke furniture. When his company went bankrupt, we had to pick up the pieces and plan for a complete restart of his life and financial journey. Asking a client in his mid-50s who has lost everything to recalibrate with optimism and energy is not easy. As much as you want to solve this client’s problems for them, all you can do is brainstorm, advise and coach on a new way forward.

In these situations, we often must deliver tough news while remaining empathetic and supportive. Even when clients express a desire to retire and pursue a quieter life aligned with their dreams, it often falls to us to tell them that their financial resources are insufficient to support such a lifestyle until the age of 100, according to our planning. Sometimes, we must recommend they continue working, even if it means transitioning to a different capacity or earning less, to ensure long-term financial stability.

The truth is, we are more than investors, planners and advisors; we are coaches.

Developing coping mechanisms for financial planners

Financial planners are trained extensively in investment strategies, financial planning and market analysis. However, our curriculum often overlooks the emotional safeguarding needed to handle these challenging conversations effectively. It is crucial for us to develop coping mechanisms to maintain our emotional wellbeing and continue to provide the best support to our clients. Here are some strategies that I have found helpful in managing these situations:

1. Set boundaries: caring without carrying

We deeply care about our clients and their wellbeing, but we must set boundaries regarding what we take home with us. Understand that while we can support and guide our clients, we cannot rescue them from their financial anxieties or life transitions. Our role is to provide a support system, not to bear the weight of their worries. Establishing clear boundaries helps us maintain our emotional health and remain effective professionally.

2. Create space between meetings

Allow time between client meetings to decompress and separate from the emotions you may have absorbed. This can be as simple as taking a walk, practising deep breathing exercises or engaging in a brief meditation session. Creating these spaces helps you reset emotionally and prepare for the next engagement with a clear mind.

3. Embrace personal rituals

When I leave work, I play loud music to release the emotions accumulated during the day. Developing personal rituals like this can serve as a powerful tool for emotional cleansing. It is crucial to find an activity that helps you transition from your professional role to your personal life, leaving behind the emotional burdens of your clients.

4. Prioritise self-care

Self-care is not a luxury but a necessity to serve our clients better. Regular exercise, meditation, prayer, quiet time, adequate sleep and proper nutrition are fundamental practices that contribute to our wellbeing. Additionally, seeking professional support, such as working with a coach, provides a safe space to offload emotions and gain perspective.

5. Emphasise emotional intelligence and training

Beyond self-care, financial planners should consider formal training in emotional intelligence and counselling skills. Workshops, courses or certifications in these areas can equip planners with the tools to handle difficult conversations with greater empathy and effectiveness.

6. Foster a supportive work environment

Creating a culture of support within your practice is vital. Regular debriefing sessions with colleagues, where you can share experiences and coping strategies, help build a mutual support network. Encouraging open dialogue about the emotional challenges of our profession can reduce feelings of isolation and promote collective resilience.

As we navigate the complexities of our clients’ financial and emotional landscapes, it’s imperative to remember that our resilience and empathy are just as crucial as our technical expertise. By continuously cultivating emotional strength and self-awareness, we can enhance our professional effectiveness and truly honour our clients’ trust during their most vulnerable moments.

• BC article link: https://bluechipdigital.co.za/newsletter/building-emotional-resilience-in-challenging-times/
• Ebook link: https://webkiosk.globalafricanetwork.com/blue-chip-issue-93/69013056/86

A comprehensive guide to retirement planning in South Africa

Let’s delve into the key components of retirement planning.- by Kobus Kleyn, CFP®, Tax and Fiduciary Practitioner, Kainos Wealth.

The concept of retirement has evolved dramatically over the past few decades. Traditionally, it signified the end of an individual’s professional journey. However, in today’s dynamic economic climate, retirement is considered a new beginning – a golden period to pursue new interests, travel or engage in social activities. But to fully enjoy this period of life, meticulous planning is vital. This is particularly true in South Africa, where the financial landscape is as diverse as the nation itself.

The importance of advisors’ diligence

When it comes to retirement planning, the role of financial advisors is pivotal. Advisors with an in-depth understanding of South Africa’s financial market can provide personalised advice based on an individual’s financial goals, risk tolerance and investment horizon. However, their roles extend beyond that – they need to conduct rigorous due diligence on fund managers and fund selections to ensure long-term growth efficiency. Advisors must critically analyse the fund manager’s experience, track record, investment philosophy, risk management strategies and more. Moreover, they should regularly review and rebalance the fund selection to align with the investor’s changing needs and market conditions.

The due diligence process is often complex and time-consuming. An alternative to this is utilising the expertise of Discretionary Fund Managers (DFMs). DFMs not only help reduce the burden of due diligence but also provide a more efficient and focused investment management approach, tailored to meet the specific needs and objectives of each client.

Fund management

A well-diversified and balanced portfolio is the cornerstone of successful retirement planning. This means investing in a broad array of assets such as equities, bonds, property and cash. A well-balanced fund structure helps mitigate risk, smoothens returns over time and allows portfolios to adjust according to market volatility.

But here’s the catch: South African investors must also consider investing within their mandate limits. These mandates, set by the investor, limit the fund manager’s ability to take undue risk and help keep the portfolio aligned with the investor’s risk tolerance and investment objectives.

Wills, estates and asset protection

Estate planning in South Africa includes the creation of wills and the selection of assets that fall outside the estate. This approach can result in significant savings on estate duty and executor’s fees and provides protection against creditors. Life insurance policies and retirement annuities are two such products that offer these benefits, ensuring that your hard-earned wealth is protected and passed on to your loved ones in the most efficient manner possible.

Political analysis of South Africa

A sound understanding of the current political situation in South Africa is crucial for retirement risk planning. Political stability, regulatory frameworks, economic potential political risks can greatly impact your retirement savings and investment returns.

Offshore investment and tax considerations

Offshore investing, especially with the rise of Regulation 28, which allows for up to 45% offshore exposure, has become a key strategy for South African investors. It provides diversification benefits, potential for higher returns as well as protection against local market volatility and currency depreciation.

In addition to these benefits, the South African Revenue Service (SARS) offers several tax deductions that can help subsidise your retirement plans. For instance, contributions to a retirement annuity are tax-deductible within limits, providing an excellent opportunity to grow your retirement savings while saving on tax. Therefore, retirement planning is a multifaceted process that requires a strategic approach, extensive knowledge and regular review.

Leveraging the expertise of DFMs can streamline the due diligence process and provide a tailored investment management approach. Whether it’s selecting the right fund manager, creating a diversified portfolio, planning your estate, or considering alternative residency and citizenship programmes – every step demands due diligence. Above all, understanding the political landscape and making the most of offshore investment opportunities and tax deductions can ensure a secure and fulfilling retirement.

Author bio:

Kobus Kleyn has published over 200 articles and authored three books. He is a multiple award-winning professional and holds eight memberships with professional associations. His most recent awards were lifetime achievements awards from the FPI (Harry Brews), The Million Dollar Round Table (Top of the Table Life Membership) and Liberty Group (Life Membership) in 2021/22.

• BC Article link: https://bluechipdigital.co.za/financial-planning-retirement/a-comprehensive-guide-to-retirement-planning-in-south-africa/
• Ebook link: https://www.yumpu.com/en/document/read/68378025/blue-chip-issue-88/20