The benefits of financial wellbeing for your clients and business

For intermediaries only

The following video is about How does a pension work and has a transcript (see below).

With self-serve platforms and ready-made portfolios growing in popularity, Aegon’s Dr Tom Mathar and Chris Budd, founder and Chair of the Initiative for Financial Wellbeing explain the benefits financial wellbeing can play in an adviser’s value proposition.

The benefits of financial wellbeing for your clients and business – video transcript

Dr Tom Mathar, Aegon UK
I just offer some sort of like top line thoughts here, why think about investments, retirement planning, protection, etc from a financial wellbeing perspective, rather than just a financial perspective. Now I will start with this - it's really difficult for financial advisers to beat the market.

On average, it won't be possible that the investment return you can offer, especially after fees is better than that of the market.

Asset allocation is arguably becoming easier with life strategy and target retirement funds or other packaged solutions that more platforms and fund managers are offering. And we know also that the share of self-serve investors who understand how investments work is increasing. And then lastly, it's really difficult for financial advisers to compete price-wise with the much cheaper service of DIY platforms or even robo-advice.

So the question is what's the value proposition of a financial adviser when alpha, asset allocation and fees are perhaps no longer part of the USP?

And of course, the one aspect that a digital or a scalable solution won't be able to offer is the time of a human being.

So a human adviser in that case, and that's where financial wellbeing can play a role. That's the dimension that the human adviser can bring in.

So we're focusing on financial wellbeing, making sure that people worry about the right aspects of money or more concretely, that they worry about how to have enough money now and in the future – to do the things that give them joy and purpose.

That's how financial advisers can find a new niche.

One that goes beyond the traditional areas of financial advice. Also one that an area, a niche that cannot so easily be covered by algorithms or user experience that is produced for the mass markets.

But Chris can elaborate and take you through the benefits of embedding financial wellbeing into your business.

Chris Budd, founder and Chair of the Initiative for Financial Wellbeing:
I love your point earlier on about how we'll never stop worrying about money and we just got to worry better about money. That's a fabulous way of putting it.

So why financial wellbeing? Well if you have a client for whom you have beaten the market, at the moment you don't beat the market, they're going to look for somebody else. I certainly experienced that it's 20 years as an adviser.

If you talk to them about what makes them happy, however, and you helped them to be happier, they're going to stick around. They're going to stay with you as a client and the long term - it's much more of a long-term relationship that you will develop.

I would suggest it's so long term that you should also be talking to the adult children of your advisers. The more value you can add, the stickier they get, the more valuable your practice. The more long-term income you generate is good commercial decision.

But a lot of people avoid the adult children of clients because they're not profitable, but I don't agree with that. Firstly, it's an investment in the future, you could also charge time for it, charge a fee to your elder clients, so to speak.

I, with adult children of my own, I would want to spend money and give money to a financial adviser who will help my clients have a better relationship with money. It might need a slightly different proposition, but I would strongly suggest that the adult children of clients is a vastly untapped area for financial advisers.

You mentioned all the different stuff about added value to beat the competition. Vanguard coming into the UK financial advice market. So their initial proposition looks a little bit odd, I think with some you can't be a couple, and you've got to put all money with them, but this will be developing. It's not going anywhere.

If you're talking to your clients just about the money, then you're going to be in competition with people like Vanguard, if you can talk to them about their lives - what makes them happy in an informed and knowledgeable way, then I would suggest you're going to be around for a lot longer.

And the last point is so important, joy and purpose: Your purpose.

Now there's a fact that I'm going to pull out here, which is that we know research proves that a person who sees money as the objective will be less happy than they would otherwise be. So if you are living a life of accumulated wealth, and that is your objective, you will be less happy.

 If that's all you're talking to your clients about, you're in a way making them less happy, because when they're coming to your meeting, they're not looking forward to it. “I've got to go and talk about money again”. But also you, if you are only talking to clients about money, you will be less happy because that's your focus.

You can talk to clients about their happiness, then that will make that will make a much more enjoyable job. And I can tell you having done it. And it is a much more fun way of doing work.