Paul Armson thought that being an adviser was all about selling investment products — until he started asking different questions. He now heads Inspiring Advisers, an organisation working to restore financial planning to its rightful place as a valued profession, totally unconnected to the wider investment industry.
Why did you set up Inspiring Advisers?
I set up Inspiring Advisors to help advisers to get really good at what they do. Primarily it’s an online training resource to help them adopt a client-focussed lifestyle financial planning approach, which I believe is really important as we move towards a fee-for-service profession. Throughout the world, how advisers are paid is becoming more transparent, so you need to deliver real benefits to clients.
What was it about the investment industry that made you decide this service was needed?
Back in the 1980s I was a typical financial adviser, primarily thinking in terms of making sales of financial products — investments, pensions, savings and so on. But all the time something within me felt like I should be asking different questions of clients. So I started to change the way that I did my questioning, and clients opened up with me and told me about their goals and aspirations. And it then seemed logical to me that I needed to crunch some numbers to identify what they needed to do to achieve the lifestyle they wanted. In other words, my job was to help them answer the big question and that is, How much is enough? Most of the time people don’t know the answer to that.
You talk about there being three types of client. What are they?
One is what I call the Not Enough client — in other words, they haven’t got enough money to support their future lifestyle. Then there’s the Got Too Much client. They have more than enough money for the rest of their life, but they don’t always realise that. So my job is to help them to enjoy their wealth, while they can, before they’re too old to enjoy themselves, and also to make sure they plan to avoid taxes on death and so on. And then there are what I call the Just Rights — clients who’ve got the right amount of money for the rest of their life. They go through life holding back and not really enjoying their money because they’re always worried about it. They either go without or they spend money and then feel guilty because they don’t think they can afford to.
You often use the phrase ‘lifestyle financial planning’. What exactly do you mean by that?
Financial planning, I believe, is a three-stage process. The first stage for any adviser is to connect with the client. In other words, Where are they now? More importantly, Where are they trying to get to in the future? What sort of lifestyle do they want? That’s a primary need for every client. The reason why you work so hard is to get a good life. And now you’ve got a good life, you want to maintain it and enjoy it, with peace of mind. Things like investments are just there to serve that need.
Once you’ve done that, you then need to start doing some financial forecasting, looking at cashflow modelling to identify what needs to happen to secure that future lifestyle. That involves looking at net worth, assets, inflows, outflows, tax, liabilities and, in particular, the cost of that lifestyle going forward. Then, and only then, should the adviser recommend any form of financial product. That comes after financial planning.
In your view, what is financial planning is not about?
Financial planning is not about investments. It’s not about products — this fund or that fund. And that’s where, unfortunately, a lot of people have been led astray.
The financial services industry is a very large concern that makes billions and billions of profit every year. That’s done through creating, on the whole, expensive and unnecessary financial products. The big institutions have big pockets and they’re able to spend lots of money on advertising these products to the consumer and, worse than that, to gullible financial advisers who believe that it’s their job to recommend the latest this and the latest that, or the top performing fund.
That’s one of the biggest problems with financial advice — that most advisers focus on the product rather than the client. They say that they’re focussing on their client, but really, their discussion is about the funds and reviewing those funds and moving those funds around. Unfortunately that’s what they think their focus should be.
In Part 2, we’ll be asking Paul:
Why do advisers continue to recommend high-fee funds and the latest top performers?
Does everyone really need a financial adviser?
How should you go about finding a good adviser?
What does the future hold for the financial planning profession?
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Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
