Engage Clients with Excellent Re-profiling: Revealed Preferences #4 – Transcript

Dean Holmes
Welcome to episode four, I’ve revealed preferences, the key to deeper client understanding and better advice. In this episode, we’re going to be talking about how a client’s risk preference can change over time. pinpointing those changes can support a positive, personalized advice experience, and really ensures that clients are invested as it should be across time, we’ll talk about how to read profile without creating heaps of work for yourself or your clients. Today, I’m joined by Louise Parker to talk about these client changing preferences, how to spot the shifts and what to do about them. Welcome the ways.

Louise Parker
Thanks, Dean. And yes, Louise Parker. I’ve been in the industry since 1989. And I wouldn’t have it any other way. And, and with these tools, and how I run my business, it just makes it more efficient, makes it a better experience for the client. And I recently moved from Melbourne to Gold Coast. And now Port Douglas and loving it. So I’m all about yeah, there’s a lot of tech out there that I’m all about making sure the tech works. So I’ve been using capital preferences now for gosh, since 2017. Before I went on that study tour to Berklee College and met the professor. Yep. So I’ve been using capital preferences since 2017, as I mentioned, and the tool actually used to be called True profile. So you might hear me refer to it as that today. But yeah, I use capital preferences risk profiling suite to risk profile my clients. But it did used to be called True profile. So if you hear me say that, that’s why,

Dean Holmes
excellent. So we’ll get into a little bit of the detail around that. But obviously, a great career so far, Louise, in terms of seeing a lot of things changed since 1989. So we’ll, we’ll delve into the data a little bit as as we go. So tell us a bit about what advice was like, in that first 10 years of your career? were you actually doing risk profiles at that point in time?

Louise Parker
That’s the funny thing. risk profiles never came in until there was a lot of complaints, I guess, to the government and consumer, places where they were turning around and saying, hang on, I didn’t know I was invested in shares. And I didn’t know. So that’s when it sort of came out. And it’s a great, great journey for the client to to ensure that they understand where they’re invested. And that things can go up and down. And, and even though it seems like a basic thing, and it’s blase, there’s a lot that goes into a risk profile.

Dean Holmes
Excellent. Excellent. So you started using the software as the SS solution back in 2017. What were you what were your challenges with the traditional method of risk profiling, which I which I assume back then was it was sort of a multiple choice question or something like that? How did that work? In your advice, practice? And what were the issues that you’re coming up with going through that journey?

Louise Parker
Yet, the biggest issue I’ve always had is, a client will turn around and say, That’s what I pay you for. You tell me where to invest. And so if they don’t understand it’s, I’ve got to build something to where they’re comfortable. Yes, I can push them out of their comfort zones. But ultimately, they need to know what to expect, so that they’re not ringing me on the phone going. Hang on, the stock market just crashed. 10 million has been wiped off, what the hell’s going on. So it’s a great education tool, as well as making sure that a person’s invested and knows where they’re invested. I’ve always said to a client, there’s three things, you know, how, where, and why it does what it does. And I think that’s important to convey to a client so that they’re, they take ownership.

Dean Holmes
Excellent. So tell us a little bit more about that. So you said how, where and why, what’s the how,

Louise Parker
yeah, so there, how is okay, how are we going to get you to your goals? And you need to know, a client’s risk profile to be able to do that. Because there’s no point saying, Well, this is the goal I want, and I want all my cash in the bank. It’s not going to usually sort of generate along that line as in how, how are you going to do it? How are we going to invest the money? You know, can they do it and just be in cash? The Where is okay, where are we going to place the bonds, okay, which is not an issue, but you need to know, through their true profile and their capital preference as to how much is going to go into shares how much is going to go into to that asset allocation. Then the when, where, what wasn’t where, why and why. And that’s the main important thing is why we’re doing this why we’ve got to have you in Is this bucket approach or true profile to be able to ensure that they get the most out of it? And, and we get them on their way?

Dean Holmes
So what was what was broken? Did that paper form not do that? Or what was broken? Yeah,

Louise Parker
that that. Look, I don’t want to get myself in compliance trouble here. But even sometimes, you know, you had to really step the client through those questions. And I understand why people just send it out to the client. But I don’t want that either. So I’ve tried a lot of ways over the journey, and over the time to ensure that, okay, sit in front, and you go through and, and I don’t like doing that either, because you’re guiding the client, technically. Because they look at you for good for guys, your

Dean Holmes
cues and guidance. Absolutely.

Louise Parker
Right. If you post it out, or send it out to them, via my prosperity, then what happens is, they go loose, and they have no context and no idea. So by doing it and saying to them, okay, I’m gonna send out, and I hate using the what the word, it’s again, because it’s not, again, to a client, it’s their money. So it’s a case of I usually say, it comes out, it’s six scenarios. And those scenarios differ, you do whatever you’re comfortable with. And that’s virtually all I have to say, and the clients pick it up it, they love it, they just put that little bar across, and slide it across to what they’re prepared to gain and what they’re prepared to lose

Dean Holmes
out. So it is simple. And it’s and it’s easy for the for the clients to do it. And I like the point that the risk profiles that we do in front of the clients is that if we go through that journey, we inadvertently lead them down a path. And we might have thought, we may think that that’s education, which there is an element of educating clients or around investments. But financial literacy overall is relatively low, across the across Australia and the UK, and the world. And so we’ve got to come up with a way in which clients can make a relatively comfortable decision. And this win loss or gain and gain and loss element is seems to be working in the terms of psychology of clients to identify these these preferences. So Louise, you went in 2017. To to Berkeley, tell us a bit about what got you over there, what you learned, what was the jaw dropping moments of that of that journey? And in this part,

Louise Parker
yes. So we got to spend the day with the professor. And he is absolutely awe inspiring, I find could never understand why people would want to carry on and go to school for longer and longer, as in go to uni and do this course, this course and this course. But now I understand why they pay professors, the big bucks, because they know how to teach and, and everything. Just honestly, it was a lightbulb moment because I’ve been using SHOW PROFILE before that. And and trying to educate my clients and going, you know, what is this really trying to prove? But the way he explained it, the science behind it, it makes sense. And it’s proven. And I guess that’s the big lightbulb moment I had is that hang on, we’re not just guessing in the clients, you know, that has financial literacy at a low point is trying to answer these questions, these, you know, 1012 questions, get his in a normal risk profile. And it’s and it’s true, this is like a a general practitioner and a specialist in that you can either just, you know, see the risk profile as per the questions, or you do this capital preferences, true profile, and it is like an x ray. The client may think that they know where they’re at. But this is scientific proof, where I can turn around and say this is where you are this is you know, I’ve looked at under everything the nooks and crannies the bone, you know, this is the bones of where you you need to be or how you will react to different risk profiles and disparate returns.

Dean Holmes
And this is in a this ends up being in six simple questions, which which obviously makes the process easier at the end of the day. So in terms of your clients, so how talk to us, firstly, about how you position, this risk profile for for a new client. And then after that, we’re going to go into a little bit more detail about how we’re going to do it. How you do it every year with clients as well. But what’s The story and explanation that you provide to clients before you hit the send button or, or get this profile out to them to do it.

Louise Parker
So what happens with a first appointment is I will sit down with the client, usually over zoom will complete the personal financial questionnaire, and I’ll delve into what they’re wanting to do, I will then also explain to them that I’ve sent them through my prosperity, a true Profile link. And the reason why I use and copy that link into my prosperity is because I have I tell all clients, new clients, never click on any links, it’s just too dangerous these days. And so when it’s in my prosperity, I know that it’s a safe link, and they know they can, then they can click on that. So when I send out the true profile via the link, they make sometimes complete that with me, depending on reading the situation and what time we’ve got left, I educate them and sort of tell them that, you know, markets go up and down, this will be able to give me a full indication of where you sit and what you’re comfortable with. And I get them to complete it. If it’s a couple, I’d like each one of them to complete it. Because yeah, there’s look, I would say seven out of 10 clients are the same, because they’d been married a long time. But there’s always that two or three, where yeah, they’re on completely different planes. And, and so we need to address that. So when they have completed that true profile, then sends me a report and I get notified instantly when they have completed it. And I’ll go in there, and I will download it and look at their results. The results are very, very interesting. They’re in depth, I know I can then and it gives me everything to then either send it to them and see what they say. Or if it’s different to what we’ve gone through in the initial appointment, I will set up another time with them to have a 15 minute, half an hour call with them to then go through the results.

Dean Holmes
Excellent. And the difference between couples and singles in that conversation? How are you tackling that next element of saying, Well, how am I talking to clients that have two different profiles? And how do you navigate that part of it?

Louise Parker
Yeah, and that’s the beauty of true profile or capital capital preferences, it will actually go through and when you’re showing the client and presenting those results, you can show it all there as to where they need to be where they should be. And it just makes it a great conversation, to get both of them either on the same page or her money, there is money there. And you’ve really got to read the client.

Dean Holmes
Excellent. And the journey that we that we wanted to talk about with you as rollaways is that the journey of how these preferences change over time. So we broadly know that clients should or do become more conservative over time as they move from accumulation into retirement phase. And so you’ve been using the you’ve been risk profiling for a long period of time, obviously, with you’ve had clients for a long period of time. So over your journey, you may have seen that and it’s good to understand how you’ve experienced that with your clients. And how is this? How are you seeing it in the results of the software? And what are you doing as a result of that?

Louise Parker
Yeah, with the new version of true profile? It has been fantastic, because it gives you that that deeper client experience. They do change. But strangely enough, you’ll find what I’ve found in my circumstances, clients that have been with you a long time, yes, go Why do I have to do that again? You know, Lou, I leave it up to you. And when they do it, you actually they they want to take on more risk. That happens more likely, because they’re comfortable, and they trust you. So then like they don’t see the ups and downs because of the strategy that I’ve put into place. And so they go and loo get comfortable and it comes out differently, that they are happy to take on more risk. I’m the one that turns around and says, no, no, no, at this stage of your life. You don’t need to take on extra risk. You’ve got enough money. We can do that if you want but you know you don’t want to be the richest person in that cemetery. So don’t take the risk. You don’t need to. And so we have that conversation. And it comes around that yes, there’s clients and it really depends what’s going on in the world as to whether they will be more conservative. So when COVID hit yes, they become A little bit more conservative because I didn’t know what was happening in the world. But you’ll, you’ll probably find nine out of 10 times they’ll stay where they they normally are, because it’s an x ray of what’s lies underneath their feelings, not just on a whim or a a is whimsical.

Dean Holmes
You see Kobe? Yeah, absolutely. Like if you use COVID, as the example, like, when you’re going through this process COVID doesn’t flash up on the questionnaire as as as a risk factor, it’s sort of the, as you said, before the game, the game part of it. So the short term noises don’t necessarily appear, which is, which is really interesting, in terms of the X ray into people’s people’s preferences, and also the the element of that clients may be willing to take more risk as they age. But but more importantly, it’s they’re willing to, they may be willing to take more risk as they grow in experience and confidence in working with an advisor. And so that’s the unadvised versus advised insights, that perhaps, that we get more confidence as we get older, because we have experienced, but also we’re aware with a partner, such as yourself, that’s then guiding us through. And so he said, Well, I’d like to take a little bit more risk through through the through that process as as a result. And so do you are you disciplined now in terms of your business in sending out this profile to every client, at the same time a year coming into their annual review? What what do you do in that regard?

Louise Parker
So what I love about it is that I can put to remind me in three months to do it six months or 12 months, and so it will automate and do that, which is great. I always make sure. And that’s really important for new clients. Because, you know, sometimes you can feel that they’re, they’re happy to take on more risk, or they’re saying more risk. And even though the X rays come back, and they’re conservative, for them to reach their goals, they need to come out of that comfort zone and be balanced. So it’s depending on the situation and the client. And you can see all that in the in the response from through profile, is you want to be able to make sure that each year, it goes out as part of the review process before you actually meet with the client, again, so that you can have those more rewarding conversations, do a presentation, because there’s a present button on true profile. So there’s a report free, and there’s a report to present. And it works in really, really well so that you can preempt and send it out once they’ve done it before the appointment. But you’re still present at the appointment to be able to say, Okay, where do we go from here? Do we need to change? Are you still comfortable? Or is this way you want to be?

Dean Holmes
Excellent. And the the interesting thing, Louise is that clients don’t know that they’re going to be risk profiled when they start a relationship with a financial advisor. It’s not a concept that they were ever aware of the process. But then I suppose they get used to it year after year, that something may change, and they enjoy doing this process.

Louise Parker
Yeah, well, can you always get the ones that like, oh, no, not this again, it hasn’t changed from last time, we’ll hear me. Let me see how it affects, and whether you’re still on track. And so I use it more like that saying, we just need to keep you on track. So let’s Can you complete it? And then I can confirm that you’re on track?

Dean Holmes
Absolutely. And that’s a problem with that. And that’s the GP isn’t it? Louise? Like you go and see the doctor once a year to check that everything’s okay. Think of that financial health check or the health check. You can’t tell the doctor that you think good tickets, okay? Because you can walk up the steps and you don’t you don’t lose a breath. So it’s really the same element is here is if this is an x ray into your, your preferences, which is better than what we know ourselves, then we have to do these things every year just to check that everything’s okay. And clients. Once they’re working with you, obviously they start to do what they’re told in this regard as well. For advisors, Louise, what would you tell advisors that just do risk profiling one. So the data from Capitol preferences like one in 10 advisors, like only only profile their clients once and then there’s only a certain other subset that only they try to do it every three or four years? For example? What would you say to advisors on how to get over that hump? And what is the benefit to the client conversations that you’re having?

Louise Parker
Yeah, it’s exactly like you just said Dean in that. This is a check. To make sure you’re still on track, so you get no, come back in not wanting to do it. The reason why it has to be done each year and why I’ve done it each year is because it just reiterates to the client. And it gives them that opportunity to ask questions to get their education up, and not feel bad about feeling like, geez, I don’t know what I’m talking about. And I have low financial literacy, no one comes out and says, I’ve got five low financial literacy, it just doesn’t happen. So therefore, by doing this, you’re giving the space available to a client to come out with questions to, you know, I always say there’s no such thing as a stupid question. There’s just a dumb answer I can give you. And yeah, it makes a client laugh. And then they, they just feel more comfortable. And doing it each year, they come to expect it. And look, there’s been times where I’ve just gone, I can’t, I can’t deal with this client to do this again this year. And so sometimes I will miss it. And it’s amazing how they come back and go, where’s that game? I want to do this question, because they just know is part of the process. And it works well. Don’t get backlash. That’s,

Dean Holmes
that’s good. And so the advisors that are that are only doing it once a year, they’re there’s some of the research that the capital preferences Ensemble did was all about that, that there is an increase in like the NPS net promoter score. So clients overall are happier, as a result of increasing the frequency around the the discussion of risk and investment risk and their preferences, as well as the intention to increase funds under advice. So there’s this the confidence that happens between the client and advisor because we’re following a discipline process around their preferences. And it makes clients happier, as a result,

Louise Parker
advisors are missing an opportunity. And that’s what it is. I mean, I have so many clients, and my business has just been based on referrals. Because you’re getting, you’re getting that one level deeper, or quite a few levels deeper. And clients feel comfortable. I mean, Mike, I mean, yeah, you could go back to my clients and say, you know, are you happy with the weasel? And I’m sure nine out of 10 job because the all of them refer to me. There’s not a client that that does not that I know of, that doesn’t refer when there’s an opportunity there or a mate or a friend. There’s like so many clients ring me and say look like, you know, your client has, or a friend of mine has referred. And I say, Oh, can you let me know who it is because otherwise I don’t take you on as a client, because I’m just too busy. But I will for my existing clients if they refer me. And it’s a case of that strength. And that bond, they turn around and go, Look, I’m so sorry. They referred me like three, four years ago, and I haven’t run until now. And it’s all because you build up that that nice rapport with your client, because you’re going in deeper. Any advisor that only does it once a year or once every two years because I know that licensees were saying at that point in time, you only have to do it once every two years. I always just do it every year. It’s like, why not? It’s a bit like the disclosure statements. Just do it every year and get it out of the way.

Dean Holmes
Yeah, absolutely. And the getting on to the licensees, obviously, they have a different they have a variety of views in relation to this. But I suppose what you’re seeing is the need to move away from the licensee policies. And it’s actually more about a client retention and client satisfaction journey more than a licensee policy to get these things done.

Louise Parker
Yeah, it’s to me it’s it’s do the right thing by the client. I mean, as I said, originally through this, it’s why does it matter? Like, who cares if you’re doing something too much? The client doesn’t know that you’re doing it too much, or doesn’t know that you’re not doing enough. So just just reiterating. Yep. This is This is to keep you on track. This is to keep you on track. It’s just like a train, choo, choo, choo, choo, choo train. Keep

Dean Holmes
let’s keep it keep the clients on track. The next thing I wanted to talk about was just how you were identifying the let’s call them the scared clients or the overreacting clients. So you go through this preferences, and it’s going to flash a giant yellow light or red light that there’s some clients that will be oversensitive to the volatility. They may still be a growth investor say but they’re going to be sensitive to the volatility. What do you do as a result of finding out that information?

Louise Parker
That’s what What I love depending on timeframes and all the science behind true profile, somebody can be a growth growth portfolio. But their sensitivity to losses, as you said, is like skyrocket up. They’re not in their majority quartile. And so therefore, when you look at that, and see that and understand the report, you can then have those deeper conversations because you know, this client is going to react. So why wait until there is a major market crash or something happening, educate the client, I usually say to the client, I know this is what you’re going to do if it happens. And it’s amazing how many initially until they get to know me, and, you know, they had second review, fourth review, third review, six review, will say no, I’m not like that. Yeah, they are. Because it comes back down the track, if you haven’t, and you can educate the shit out of a client, and they’re still only gonna remember what they want to remember. So

Dean Holmes
yes, absolutely. And it’s cool. It’s really interesting, because we all would have one of those, one of those clients that we’ve met, and we got, we knew in advance just the intuitive nature of an advisor, we know that they’re going to be a nervous investor. And so we kind of hold those, well, maybe there’s too, but we not when we know our gut tells us that we have a few nervous investors. But then this is a this is a scientific process over the top of it, to identify those ones that we didn’t even know were going to be nervous until you’re in it. So obviously, during COVID is one example that we know the stock market fell, and all advisors would have had some type of plying questions. And that ranges quite significantly across the advice practices. But then I found that there’s always like one or two that you just didn’t expect when you did the traditional risk profiling, because it doesn’t really identify the loss aversion. So we always had those one or two that caught us by surprise. And typically, they were like, quite educated, sophisticated, but then they didn’t like losing money.

Louise Parker
That’s right, exactly. And that’s why it’s great to then resend it out. Again, it doesn’t have to be at the review it you know, it can be any time throughout the year, you send it out and say, let’s just get this back in check. Can you please do this again, for me, and they’re more than happy because, you know, their little hearts pumping like that, because they are nervous and everything. So they’re more than happy to go out yet yet. Let’s, let’s double check, let’s do it. And it’s amazing how many times that it still comes back to where it was. So the sensitivity may be a lot higher, but their risk profile as in the true profile of is still where they they are. But it’s just giving that education process back to them. Because, you know, they’re they’re feeling, you know, a little bit worried or

Dean Holmes
nervous. And that’s a, that’s a great education to read. That is that you’re, you’re acknowledging once again, through that process that Yes, Mr. client or Mrs. Client, you are nervous, but you’re still in the right investment allocation for your longer term preferences. But you’re just going to feel a little bit worse than the other people through this journey. Because you’ve got a higher risk aversion doesn’t mean we should change the strategy and the path, but it’s just your you will be a little bit more sensitive to that to that path.

Louise Parker
Correct. And then that allows the advisor then to put a path of educating into place for them. And and just knowing that if something happens, maybe it’s a case of sending something out, you know, if an event has happened, just to reconfirm that it’s okay, um, look, leave it up to the client, do you want this three monthly, six monthly or 12? Monthly that the client choose? How when they want to do it? But yeah, I mean, it’s minimum monthly, minimum, as in

Dean Holmes
annually. And from a business perspective, Louise, how, how does this software in your attitude to risk profiling every year? How’s that made your business more efficient or quicker? Or can you serve more clients as a result?

Louise Parker
Well, then that those novice ones aren’t ringing anymore because I’ve educated them so. So it makes it efficient, you know, that this staff know to send it out with the link in the My prosperity for it to be completed. It tells you when it’s done, you then send out another follow up when it’s not. But most clients, it’s not a half hour job. It’s not a 10 minute job. It’s literally six questions, slide to scale. And yeah, most people get it done in to three minutes.

Dean Holmes
And I’ve found the traditional risk profiling process of a, let’s say, a paper form this, this may take the client and the adviser 30 minutes or 45 minutes to complete, because there’s a lot of leading the witness, as well as educating as well as getting confused and asking you for help. So I think the the big takeaway in terms of the time invested is that we’ve shortened the process of identifying their preferences, we can therefore reinvest some of the saved time in educating the client, but it’s very specific education based on their preferences. So it’s not a shotgun approach of education, it’s just I’m going to teach you the three things that are relevant to your profile. And then the client is going to walk away more satisfied through that. And you’ve already shown us that this is a, this is a link that gets sent out to clients. So they can do it literally on their mobile phone, in front of you, or in front of you on the Zoom call. And then that way, they’re able to do these things with you or without you, but very quickly and easily on their mobile phone. As we know, everyone has their mobile phone in their hand the entire time exam and buying expectations now are definitely around that, that all journeys and processes should be as good as the iPhone. So yes, doing a paper factfinder a paper risk profile, just confuses and surprises clients, I think as well, at the end, at the end of the day,

Louise Parker
totally the amount of times with a paper based where a client would say, I’m in between those two. So you know, if the scores were 2030, I’d have to give them 25. I mean, it was like being a school teacher, which I get. We know how all of us get on with school teachers. But it’s a case of, yeah, this is in the palm, you can do it straight away. You can guide them as in here, do the six questions. It’s five minutes, not even that two minutes. They do it. And then you can present the results immediately if you if you wanted to.

Dean Holmes
Absolutely. So thank you, Louise, this has been a great conversation to teach us as advisors, a new way in which we can talk to our clients about identifying their preferences, talking them to them about their loss aversion. But the main thing that I’ve heard from you today is obviously the better customer service client service that we can have through this. So we’ve got a better retention of clients. We’ve got better ongoing conversations with clients, therefore happier clients. So happy client means a happy financial advisor and referrals through that process, which is amazing. And then the second element is this business efficiency, which is also vitally important. So we’re actually speeding up parts of our business process because we’re not using paper forms and leading clients through a variety of education elements that aren’t relevant for them. So thank you very much for joining us today, Lou, and a great conversation. And obviously, if anyone wants to chat to Lou, about her experience, her details are through the ensemble app and through the podcast, and we look forward to seeing your journey going forward. Lou, have a great day she very much bye