Five essential discussions every financial adviser should have with their customers in 2024

This year marks a transformative chapter for financial advice. Picture: Independent Newspapers.

This year marks a transformative chapter for financial advice. Picture: Independent Newspapers.

Published Feb 13, 2024


By: Henri le Grange

This year marks a transformative chapter for financial advice, where the blend of nuanced communication and forward-thinking strategy will lay the groundwork for lasting financial well-being. It’s a time of great potential and pivotal change for financial advisers.

As we navigate through shifting market trends, technological changes, and the introduction of the innovative two-pot retirement system currently scheduled for September 1, it becomes increasingly important for financial advisers to engage in strategic conversations with their customers.

The two-pot retirement system, a bold response to the classic risk-reward problem, offers a balanced and structured practice for retirement planning. By categorising savings into two separate pots, this system provides customers with short-term relief during financial emergencies. This system promotes present-day financial safety and ensures customers think more carefully about their retirement years.

The following five essential conversations allow advisers to guide their customers towards making informed financial decisions, ultimately leading them into a better financial position.

Conversation 1. Goal Setting

Effective goal setting involves aligning customers’ short-term and long-term financial aspirations with realistic investment and risk management strategies. Advisers should facilitate this process by helping customers define clear, measurable goals and designing a tailored investment approach to achieve these objectives. This method provides a road map for financial success that is both ambitious and attainable.

Tailoring each individual’s unique financial scenario is essential. This personalisation involves considering factors such as risk tolerance, timing, and specific financial goals. Advisers should work closely with customers to customise their investment strategies, ensuring they are well aligned with personal preferences and life situations.

Conversation 2. Behavioural Finance and Its Implications

Behavioural finance shows that our biases and emotions greatly influence investment choices. Advisers must talk to their customers about common biases, like being too confident or following the crowd. This helps people notice and reduce these tendencies. By doing this, advisers can encourage a more logical and less emotion-driven way of making investment decisions, leading to more innovative and strategic financial choices.

Conversation 3. Balancing Immediate and Long-Term Financial Needs

A critical skill is navigating the tightrope between immediate financial needs and long-term aspirations. Advisers play a crucial role in helping customers understand the importance of maintaining an emergency fund while simultaneously investing in long-term growth opportunities. This balanced strategy ensures financial resilience in the face of unforeseen circumstances and steady progress towards future financial goals.

Long-term financial stability is a cornerstone of an effective financial plan. Advisers should encourage customers to contribute to their funds and maintain a diversified portfolio consistently. This disciplined approach and the system’s structure help build a robust financial foundation to withstand market fluctuations and other economic challenges.

Conversation 4. The Evolving Role of Financial Advisers in Customer Relationships

The role of financial advisers is becoming more dynamic. Advisers should focus more on understanding their customers’ evolving life stages, financial situations, and emotional needs. By aligning financial strategies with these changing dynamics, advisers can provide more personalised and effective financial guidance, leading to stronger customer relationships and better economic outcomes.

A financial plan’s strength lies in its ability to be diversified. Advisers should highlight how the plan allows new options based on changing life circumstances or financial goals. Additionally, it should focus on diversifying assets across different classes and timelines to help mitigate risk and optimise growth potential.

Conversation 5. The Rise of Digital Financial Tools

The rise of digital financial tools has revolutionised how customers interact with their investments and manage their personal finances. Advisers should emphasise the convenience, accessibility, and real-time analytics these tools provide, which empower customers to make more informed decisions. Furthermore, integrating these digital solutions into financial strategies can create additional options tailored to customers’ needs.

* Le Grange is the finance certified financial planner at Old Mutual.