The financial service industry has long approached wealth creation at the household level by leading with “product before strategy”. This is like selling someone a house before asking them where they want to live or how big their family will become. That Corporate approach allowed many of Australia’s major financial institutions to become the most dominant force in financial advice because they also are the providers of products. However, over time we saw how this led to some subpar client outcomes culminating with a ‘Royal Commission’ in 2018.
By flipping the process upside down and removing any product sales or third party commissions, Stellan Capital can focus on what clients really want: investment insights, education & guidance.
“Thou Shalt – Do No Harm”
The medical community is an inspiration to Stellan Capital because of how they marry the best parts of scientific method and education. They are obligated to take complex matters and make them easy to understand for their patients. Understanding is the greatest factor in building trust.
Therein lies what has likely gone astray in financial services: selling product is not how you best serve the public. Your advisor’s primary purpose should be - like a doctor - to ensure clients have the necessary tools to ‘keep themselves financially healthy’.
A recent study published by Vanguard*, reinforced how trust in their adviser led to better outcomes for the client as they are more likely to embrace the advice they were given – just like a patient/doctor relationship.
Our four corner approach
The secret to our success is understanding the friction points that hinder clients from taking advice in the first place. We accomplish this through our ‘four corner’ approach.
- First: recognise that wealth doesn’t inherently come with complex financial literacy, all advisers are required to impart that knowledge and be champions of education.
- Second: the client must feel that the plan is suited to their values and view of the world, not ours.
- Third: excessive complexity of the explanation of investments or products is alienating not endearing, clients aren’t impressed with fancy talk. Doctors don’t do this, neither should we.
- Fourth: be transparent with your fees. Like a doctor, you can both act in the client’s best interest and still charge for your services.
Transparency and trust aren’t ‘either/or’
How we communicate and enlighten our clients on how their investment portfolios work is in our view, the secret to our success. The same Vanguard* report found that 94% of investors were more likely to make a referral when they trusted their advisor. As 100% of our client growth is referral based, we have absolutely seen this to be true.
Doctors don’t lead with the medicine or products they prescribe … and neither should financial advisers.
*Source: Vanguard. The evolution of Vanguard Advisor’s Alpha From portfolios to people 2021