#89 David Kop – Transcript

Louis van der Merwe
For the formal part, welcome to another episode of ensemble advice. South Africa. Today I have with me David Kop. David Kop was a director at the Financial Planning Institute, spent a lot of time thinking about financial planning, and now he gets to work with financial planners to improve the way they run their businesses. David, thanks so much for joining me today.

David Kop
Thank you, Louis. And thank you for having me on. Always a pleasure talking to you and talking about financial planning and more specifically, financial planning businesses.

Louis van der Merwe
David, the last time I saw you, you seem to me, you said that you are becoming a farmer. What happened to that dream. And nowadays, FI Consult what happened in between, I was looking forward to having a farming discussion.

David Kop
So the fun thing is, I’m now wearing two hats. So the farm is still happening, there was a bit of a delay with the purchase of the land, you know, the municipalities is defunct. So it took a long time for the land to be transferred. And in fact, last week, we broke ground on building building the property. So you, I’m gonna bring everything back to financial planning. But building a house is just like financial planning, right, you start with a plan, you got to build a solid foundation. So that’s what we busy doing at the moment building foundation, and then you can put up the walls and the pillars and the roof and everything to cover. So that’s still happening, just slightly more delayed than then what I hoped. But like I said, we’ve broken ground, at the guy with his machine digging trenches, and pools and septic tanks. And hopefully, in the next two months, I’ll be on the farm.

Louis van der Merwe
That sounds very exciting. And congratulations, that brings with new challenges. And, you know, what strikes me is just moving from a full time job where essentially, you had to be super focused, I’m assuming with the Financial Planning Institute, and then jumping into being self employed, but also doing two things at the same time. Tell us about that transition. We often talk to clients, but you know, this is this major life transition between moving jobs or even moving to a space of retirement. And I’m by no means saying that you’re going into retirement. But tell us about this, this shift between formal employment and now figuring out your own passions. How easy how difficult was this? And what what can you learn that you can share with financial planners that clients might experience?

David Kop
So strangely enough, this whole thing started because me and my wife, were having a conversation about retirement, and what does our retirement look like. And it was always a dream, to own our own piece of land, and to get to food security, and be able to grow our own food and look after things. And we were kind of having the discussion about, okay, so this is what retirement looks like. But then the question came up, what is retirement and when is retirement, and then the opportunity just came up. And this is the thing, it’s, you never quite ready for these kinds of things. I mean, at the time that are left to probably not the best time to leave secure employment, right, with the secure paycheck and start your own thing. But you have, and you do your planning, you do your checks, you do your calculations. And it’s a case of saying, Well, if we don’t do it now, when, and it was a case of, you know, I’m now 4546. And if I wait till 65, we’ll actually be in a physical place where I can start the farm and, you know, start digging new holes, and building houses and things like that. So when the opportunity came, we were ready for it. And we could take the opportunity. And I think that’s really what financial planning is all about, right is planning for those opportunities, and making sure that when they arise, they can be taken and they can be done.

Louis van der Merwe
Really, like are you positioned that? I saw a post this week of one of the consultants Penny we’ve had on a previous show, and she presented to a group of financial planners and they didn’t use the word retirement. They specifically use the words make work optional. And that resonated with me, and it almost sounds like you’re working on kind of that plan without necessarily linking a timeline to it.

David Kop
That’s exactly it’s an amine. The concept of retirement being a date that we’ve got to put a peg in somewhere is is old news. And probably still as a financial services industry, we plan towards a date, but as a financial planning profession, I think it’s exactly what you saying we planning to make work optional. So it’s all about your what are your goals? What are your dreams? Where do you want to get to? How do we get you there? Okay, and let’s not put a date sometime in the future. Let’s work on a plan to get you there as soon as possible. Because yeah, ultimately, happiness is important, right?

Louis van der Merwe
And well done for living this out and taking taking the plunge. So you now wear the hat of a farmer. But you also have a new business that you started with a recent guests of ours, without giving away too much share with us what a phi consult is all about?

David Kop
Yeah. So if I consult is a consulting business, and it’s called consulting to financial planners working on and in their businesses. So because we have large experience in the financial planning sector, I mean, I’ve been in financial planning for over 25 years. And I really thought

Louis van der Merwe
it’s the way your age now.

David Kop
It is, it is. Now, I started when I was three, so it’s not.

And really saying you’re all the knowledge that I’ve gained yet do I throw it away? And do this total switch in professions and jobs? And I you know, once financial planning is in your blood, you don’t leave it. So it was a decision of how can I actually use the knowledge that I’ve gained. And I also think financial planning in South Africa, and in fact, around the world is on this edge at the moment. So do I believe financial planning is a profession 100%. But I still believe it’s a very young profession, and they still a lot that needs to be molded. And if we look at the regulatory change that’s coming. When Kofi eventually comes, the conduct of financial institutions act gets in place, I think there’s a big mind shift that financial planners need to take in order to survive in the new regulatory environment. And that’s really part of what FYI consult does. But as a moving from a transactional type business to relationship type business, means that fundamentally the way you do business needs to change. And this again, helping financial planning firms evolve into the new way of running a business and particularly a financial planning business.

Louis van der Merwe
Do you think most businesses are set up for relation relational businesses? Or are they still like stuck in? They’ve built systems to work on transactions or not necessarily relationships? And how difficult to how easy is it to make that shift from a systems and running a business perspective?

David Kop
I think it is a fundamental shift. And I think yes, if we look at where financial planning came from, it came from the need to better distribute financial products, and financial products is no longer the product that we get, it is a solution that comes somewhere down the line, and still a valuable part of what we do. But what we do is, is give advice, and there’s a very, there’s a very big difference between selling a product, and selling advice. And there’s a different way that you got to interact is the things that we ask our clients now have vastly different. I mean, when I was trained when I left the administration side and, and went into the sales side and giving advice, I was trained really to ask three questions. And you ask the questions, How much money do you want, if you die? How much money if you want if you become disabled? And how much money do you want when you retire? And once you’ve got those three figures, you can build a financial plan. Okay. And I invariably Why did we ask those three questions because it led to a particular product that was designed to meet those three needs. The The reality is that people are a lot more complex and those three needs. And financial planning therefore becomes complicated when you’ve got a complex individual. And what am I talking about is because we’ve got competing goals, because, yes, for instance, we do these, these death calculations, and we figured out that you need 10 million Rand, for your family to replace your income if you pass away, which is going to cost you 5000 Rand a month. But you’ve done a budget, which means you’ve only got 4000 Rand. On top of that, the kids need education. The family wants to go away on holiday. So you can’t just allocate all of the money to this one goal. You’ve got to look at the various goals and needs of the clients. And you’ve got to say, how do we prioritize these? And if you’re just asking those three questions, and you’re not diving deeper into your client’s wants and needs and values, you’re going to miss the mark quite quite often. So what rate really changed my way of looking at financial planning. As I read values based planning Bible, Bacharach, that was the book that got me started on the journey are saying, you know, financial planning is more than just selling policies. And it’s about understanding the human. And once we understand the human, it’s about how do we give them solutions that work for them?

Louis van der Merwe
David, the thing that comes to mind is, I completely agree with you number one, that we shouldn’t be focusing on the numbers, yet, we seeing software providers like Riskalyze in America now, I think there’s a few people in South Africa that might have heard of them, or might use them, focusing on saying know your numbers know, the client risk, capacity know, the actual numbers. So do we still see that software providers and trainers are shifting towards the hyper technical space? Yet? There’s this gap? And how do we how do we balance those two? Like, is there a place for super, super, super detailed planning,

David Kop
there’s definitely a place for super detail planning. And I think the number is important, because let’s be honest, we do financial planning, okay, we don’t do life planning, we’re not life coaches, although we bring coaching aspects into to what we do. And quite often, what we, if we think about it, the client knows what their needs and wants are, right? They they’re experts in that area, where the technical aspects on the financial planning viewpoint, but what we need to do is we need to be able to marry those two. So if you look at the IT world view, you’ve got the developers and the techies who do their thing. And you’ve got the end user. And they don’t talk the same language, they talk a very different language. And somewhere in the middle, you get a business analyst who can talk both tech and end user. And if we think about the role of the financial planner, we can talk both human and we can talk financial matters. So we can take what the client is telling us, we can then understand that, and we can then translate that to saying, okay, so this is what you want to do. These are the numbers that you’re going to need to get there. How do we build a plan to get you there? I think it’s going to be very difficult to develop a IT system that can do the soft side of planning, you’ve got to deal with different systems around that. And I’m not talking about an IT system. And one of those systems is that kind of questions that you get to ask, it’s having a coaching mindset. Okay, so I’m not suggesting every financial planner needs to go out and become a coach. But you need to understand how do I ask the right questions, to get the right information out of my clients, so that I can apply my technical knowledge. And that’s the processes that you’ve got to build in your business, you got to build the process to say, how do I take all this technical information that I get, apply the human side, and then give the client what they want?

Louis van der Merwe
Because ultimately, building a business is about creating a repeatable and scalable process. And you often have people say it’s impossible to to scale financial planning, no client wants to be scaled, and we can’t grow this business quickly enough. What do you have to say to those people that think financial planning is not scalable? Is it? Is it true in your opinion or

David Kop
not? I think financial planning is 100%. scalable. And again, it comes down to to what you’re offering is and what your service offering is. I think what we can do is everything in the background, we can systemize we can use technology to help us free up our time, so that you can personalize the delivery of the outcome of financial planning. So financial planning itself is something that can be totally systemized and scaled. It is now when you start adding your differentiation in that you start looking at more more niche kind of environments. This isn’t comes from a viewpoint of saying your what is it that I’m going to be delivering to clients because let’s be honest, not every single client needs the full on financial planning experience. Some of them are just saying I’ve got a particular problem that I need to solve and I need help solving that particular problem. So that is very easily scalable. And you can use technology to help you do that. From all aspects of financial planning from the gathering of the data, to the analyzing it and spitting out reports that you can then personalize for each client.

Louis van der Merwe
David, we have a wave of people doing single needs sale Oh, yeah. And what I’m hearing you say is, someone comes with a specific problem, and the easiest thing in the world is just to address that problem and not actually take them through proper financial planning process. What do you think? How should we treat customers and clients that come with a specific thing? Is it okay to actually address that need, and then do the financial planning. And I’m mindful that, you know, you used to where the Financial Planning Institute of southern Africa has had. Maybe you can give me what your answer would have been a few months ago? And if at all, if it’s changed? No.

David Kop
And the reality is that hasn’t changed. So this is a good thing. You can have my opinion on it. And I think the reality is, you’re Who are we to force a particular way on a client? I think you’ve got to make financial planning available. And I believe, What’s it saying a financial plan is useless. But financial planning is extremely valuable. So we all know that once you’ve drafted a financial plan, the next day, something’s going to happen that makes that financial plan, totally invalid. And you need to redo it again. But the process of going through a full plan is 100% valuable, because it means that you can adapt what what you’ve planned and what is in the plan, as long as the plan has been drafted with flexibility in mind. But I think your what you got to ask yourself is if I only offer full financial planning, and a client comes to me and says, Look, I’m not ready for this right now. I just need to solve this particular problem, and you send him somewhere else, or her somewhere else, you actually doing the client and yourself a disservice. So I think it is all very good. I don’t like the term single needs selling. I think that’s that’s incorrect. But if we say, look, you’ve got a particular problem right now. So let me explain how I work. Let me explain what is more beneficial for you? Yeah, it doesn’t help during the corner piece of the puzzle without understanding what the full picture is. So our preference is to build the full picture and understand what your full picture is. But how we implement that full picture could change. So the financial planning process is very valid. But it doesn’t mean we have to do everything all at once. We can say, Let’s build the full picture, put it to one side. Now let’s start prioritizing and determine what problem we need to solve first, and let’s work on that problem and not overwhelm the clients.

Louis van der Merwe
Kim potgieter said on a recent episode, meet the client where they are. And it sounds like she meant it in a in an emotional and coaching perspective. But we could equally apply it to the actual financial technicalities like solve the problem. Is it coming coming to your office to get something solved? You should address that thing first. And at the same time demonstrate the process of financial planning and how that can be beneficial. Do you want to find out? I’ve heard that the financial planning process was ultimately created to assist product sales. Do you think that was an accurate statement? Bearing in mind that this is a probably a process that we inherited? Yeah. And is it still valuable for clients?

David Kop
I think it is valuable for clients. And to be honest, that I do believe that I do believe that financial planning started with a way of saying we need to distribute products better. So it came out of the financial services industry. But I think financial planning has evolved from that. And yes, there are still people who use it to sell products. But a majority of the financial planners who truly believe in planning have evolved way, way, way beyond that. And I think what we’ve got to get away from is thinking we’ve got to do financial planning is a process which started step one and ended step six. Financial Planning is a framework, it is something which gives us very valuable things of what we’ve got to do, and how we’ve got to get to a client. But the audit that we do it is maybe not as important as it as it once was, with technology coming in and everything like that. And I think this is again, where if we bring it back to running a business, you’ve got to look at and say, What ultimately do I as a business owner need to achieve? And how am I going to do that with the clients that I’ve got? I know that as a business owner, I’ve got needs that I need to take care of right. Okay, so let’s be honest, nobody After business to give things away for free, although for many years financial planners have given all our IP away for free in the hope that somebody buys a product and we get paid. But why did I start a business? Why did I get into financial planning in the first place? So once you understand that, you can then start determining, okay, what are the type of clients I want to work with? And how am I going to work with those clients? And how am I going to implement financial planning? So I think the process itself is fine. I think it’s still very valuable. I think how you implement that process can change. And I’m going to use my favorite example, I’m going to use the establish the relationship. Okay, and the disclosure letter. Now, I did talk a while back and as part of preparing for that talk, I Googled phase disclosure letter. And there was 200,000, ones that came up. And invariably, every one that I could find started with in terms of this the phase Act, or as required by law, I’m going to tell you some information. Okay. So what happened there is we were told that in terms of legislation, and in terms of the financial planning process, you’ve got to tell clients certain things up front. And what happened then, is a very compliant process was drafted in order to do that. Now, the problems with that is first and foremost, if you think about it, if I came to you, Louis, and I said, Look, in terms of law, I’m going to tell you something, me as a human mind me, the thing is, so if the law didn’t compel you to do this, you wouldn’t. Okay. So you’re not doing it because you want to, you’re doing it because the law tells you to. So what happens if we change that, and we say, Louis, as a potential client of mine, what’s very important to me is you understand the way that I work, and you understand the background and what I’m going to do for you, in order for you to understand that I’d like to tell you a little bit about my business. It’s a very different way of presenting to clients. And I think that’s what we’ve got to understand about the financial planning process. And in fact, what I believe the new regulatory environment is going to be about, it’s not about are you following the letter of the law? Do you understand what is required? Do you understand the spirit? And have you found the best way to deliver that to your client base based on their unique traits and abilities?

Louis van der Merwe
That’s such a classic example of this is the way it’s always been done. Someone’s use the document from a compliance officer. And 15 years later, no one has gone back and said, What happens if the marketing department or creative agency addresses this? I once attended a brand new day of a liquor business where they launched all the new brands, David, it was the most exciting marketing day when you compare it to financial services, it just felt slow and boring and old. Yeah. Which industries inspire you, when you look at to say, hey, we can take a little bit of that, you know, bearing in mind that you have your FY consulting had done to take from that industry or that segment? I guess my question is what inspires you and what would you like to bring to the financial service? Services profession? Yeah,

David Kop
it’s very strange. And this thing, I mean, my whole working career has really been in financial services. Yeah, I was going to be in accountancy. And that changed very quickly, when I hit auditing and discovered that Accountancy is not about the numbers, there’s auditing involved, and mistakenly landed a job in financial services. So the industry that inspires me the most is financial services. But more than that, I think I’m more a student of human behavior and observing people. So that has developed my mindset, in terms of, of what should happen. So your management consulting has always been something that is is been like very interesting for me in terms of, you’ve got these people who help other people run a business and hence starting if I consult, saying you’re taking there and looking at human behavior and how humans interact with each other in a business environment, because let’s face it, there’s a bit of a natural environment, right? You’re often told that you’re you’re going to work with this team of people who, given the opportunity, you probably would never interact with those people, right? They’re not they’re not really your people. So you throwing a melting pot of let’s say it’s a team of five people. They come from very diverse backgrounds. They come from are very different upbringings, they’ve all got very different value systems, and you’re putting them on a pathway to say, hey guys, you’ve got a head for one goal. And chances are if you bumped into each other in the street, you would never become friends. So it’s this unnatural environment of being forced together with people who you may or may not get along with. And how do you? How do you make sure that everyone is focused on the end goal, whatever that is of the business, so that we deliver despite our differences, and that’s probably what excites me too. And then you’re I’ve always had a very alternative worldview. So I always look at things slightly differently. So I was having a conversation before this, and you’re one of my favorite scenes in the movie world was Ed. Was that yeah, when the outbreak happened, Israel had already built walls up and things and they asked them your why, why were you guys prepared for this? And they had this thing saying, if there are 10 people sitting in a room having a discussion, and nine people agree that 10th person has to disagree. So regardless of what your opinion is, you must take the country view and argue the country view. And it was because of that, that they became ready for the outbreak and built the walls and things. So I’ve always been a bit of a contrarian. So whether it is core to my beliefs or not, I’ve always been the person who’s questioning and saying, let’s take a different view. Let’s think about it differently, we might end up going the same route, but at least we’ve considered all angles.

Louis van der Merwe
David, what I like about that is the fact that you almost approach it with a rules based system. Very similar to what Ray Dalio follows to say, there’s a blue team and a red team the one argues for and the one argues against whatever the rules are there that financial services provider business owners can follow. In a maybe when we think about the teams, when you said, the diverse group of people that is getting paid to work together, what are the things that you’ve seen, as helped transform groups from maybe not as functional to maybe a little bit more functional, that has stood out for you.

David Kop
So I think the reality is that however diverse we might see me is there is some commonality that we can find. So it is really trying to understand somebody’s core values base and seeing what is core to us. And that might be that, you know, we are all family orientated. And we all do everything for our family. So it is finding that one thing that we have in common, and building on that one thing that we have in common. And again, this comes back down to your might be too late for some people. But once you know that, as a business owner, your hiring practices should be built around that one thing. So you’re really looking for people who have that one thing, I was just reading a book about your cultures and things too. And you’re one of the examples that uses rovos rail and saying your hospitality has to be the core of your being to work on Rover’s rail. And it goes as far as to saying is that you have to be willing to clean up somebody’s vomit. Instead of having the passenger do that, you know, if somebody was sick on the trail, you’ve got to jump in there be happy about it. Now, let’s face it, most of us are not. But that shows how hospitality is the core of a beam. So it’s really about sitting down and saying let’s find that stuff that we do have in common, and work on our commonalities as opposed to our differences. And that’s also something that that I firmly believed in and the views come. We’ve all got strengths and weaknesses, right? And we’ve all been grown up and told, Look, you’ve got to improve your weaknesses and you got to work on your weaknesses. The question you got to ask yourself is why? Okay? Find somebody who can complement you and solve those weaknesses for you. Work on your strengths, deliver what you’re good at, and find somebody who can work with you to help cover those blind spots and weaknesses. That way, I think everyone’s going to end up being a lot happier anyway to

Louis van der Merwe
David, we’ve had you on Wednesdays and as a previous guest on the show, and Johan is a Gallup certified strengths coach and we’ve been working with him for a few months now. And he always talks about moving from 80% to 90% to imagine 100% on your strengths, and how world class the business can become and it really resonates with me and we’ve seen that within our business when someone plays to the strengths and start managing their weaknesses. Right. Not necessarily trying to lift that up because guess what they’ll never get to the point where someone else’s strength can actually, you know, perform phenomenally better. I want to ask what what happens in the business, when you see leadership teams be on different pages. So imagine this scenario that you created, you said that there’s a common goal that drives you. And something happens within that team. Because most financial services businesses are relatively small. I’m talking about maybe 1015 people, there’s there’s only a few very large independent practices as a consulting business, what how would you approach something like that? Yeah.

David Kop
So again, it’s throwing the tough questions out at the moment. And, yeah, we’ve got to be honest, ultimately, if that difference is so fundamental, one of the questions or one of the solutions might be that you need to part part ways and go separate ways and figure out a way to do your own things. But again, I bring it back to if if you’ve got co founders or CO leaders of business, something brought them together in the first place. So what is it that brings brought you together in the first place? And if it is a fundamental difference, is there a way that we can work that fundamental difference out in the business? Okay, so, yeah, is it a case of saying, well, and I’m going to use the very fundamental differences. One partner wants to go into pure advice, be led business and charge client fees directly? Another partner saying, no, look, I’m comfortable in the product space, and I believe in the commission model, and we should stick with the Commission model. What is the compromise? Yeah, can you find a middle ground where we can say we we can achieve both of those aims and objectives? And I believe that is if you just sit down around a table and work it out. But like I say, it might come to a point where you say, well, fundamentally, what we started out hoping to achieve with this business is no longer possible. And it might come to the point where you part ways and how do you do that amicably? That’s, yeah, that’s the million dollar question.

Louis van der Merwe
I guess the problem with evolution of advice, and how that advice will change is, is that whenever there’s change, there’s an opportunity for disagreement. But on the other end, if the business grows to a point where you can accommodate both, like maybe is that something to consider? What I really like about your approach is to say, Okay, what, what united as to begin with? Can we go back to that? Is there a way to, to kind of sprinkle that with what we’re doing now? I want to know, David, what is the health of the independent advice in South Africa? Is it healthy? We see a lot of news out there. Steve Sandusky just published some work saying, over the last two years, the average RIA in America had 0% growth if you strip out the returns of the market, so the businesses itself on really growing on average? Do you have a sense of the health of the South African independent space? Or is that not really something that you can find published information on I

David Kop
don’t think, I don’t think there’s really any published information on it. And it’s something we need to actually investigate more. But anecdotally, and when I look at what’s happening in our space, I think there’s massive opportunity for financial planning in South Africa, the we are changing this recognition that is coming from that the value is the advice we give it, not the products that we saw. If I look at the at the universities, and if we look at the growth, when I did my qualification to become a financial planner, there was one place you could do it. And there was at the University of the Free State, we’ve now got, I think, eight institutions that are offering postgraduate qualifications in financial planning that student numbers are growing. So just looking at that, it means that there is potential for to come. As consumers are starting to recognize more and more that the value I get out of my financial advice process is not the product that I buy, but the conversation that I have with the planner. So research that the FPSB did just post pandemic showed that your financial planning is really a growth, growth space and opportunity. Now, you another aspect that we’ve got to consider is should I be independent or should I be working for for product supply, and that comes down to a very personal choice. I firmly believe that if you follow an advice client centric and client first process, it doesn’t matter where you work for and whether you have five products to offer to a client at the end of it or you’ve got one product. The problem comes in when you start with the product and work backwards from the price wrapped to try and fit advice into a particular product. So, anecdotally, and from a sense of it, I think financial planning in South Africa is a massive growth opportunity. I think anyone considering advances in careers and where to go financial planning is it’s, I think, if you look at technology, I think your traditional professions, doctors on not necessarily doctors, because you still need the human operating things. But yeah, who knows? But it’s dependency? Yeah. Well, I still don’t trust the machines. And I think that’s a big rush. But accountancy lawyers, yeah, a lot of that technology is taking a lot of the work that they do away. The evolution of financial planning, has made us future proof for at least another 1015 years, maybe longer. And what I mean by that is that technology is taking all the boring stuff, okay, the calculations are sitting down and trying to figure out asset allocations, and you’re calculating your how much as a client got in bonds, equities, and putting things and putting it on spreadsheets, technology’s doing all of that for us. We can do the exciting things, which is I can sit down and say, Louis, tell me about you. Tell me what you want to achieve. Tell me what’s important to you. Understanding that, and then showing that I can give that back to you and empathize with you and put myself in your shoes. That’s something that technology can currently cannot do. Yeah, if if, if I want 5 million rands worth of life cover, okay, I can go on to an app now. And I can buy 5 million rounds with Alaska. If I want to insure my car, I can go and insure my car, within within minutes, what I’m not going to get is that personalized touch of understanding that it’s not just insuring a car. It’s insuring something that I’ve worked very hard to get. And then I want to make sure that if something happens to it that can be replaced. And then

Louis van der Merwe
I want to share something with you that might surprise a few listeners. A few weeks ago, I actually bought f&b Life cover on their app, because they told me exactly what how easy it is. I think I press two buttons. And those came, she drew bloods so it was fully underwritten. The premium was very close to what we would have been able to get at companies in any case, and it was just so easy. I couldn’t not do it. Yeah. And we sell insurance. That’s part of what we do. And yet, I went through this process to number one partly see, you know, if I was a client, what would I do? Yeah, it would have been a lot more effort dealing with a financial advisor, even if they came to us. Yeah. How do we get to a point where we can say to a client, we do what’s best for you, as opposed to what’s best for us is the is the ever place because it’s a it’s a relationship where we get paid for, you know, the process, but also partly the outcome. I guess my question is, how do we align incentives in this industry in profession that is chronically misaligned.

David Kop
So I think what it comes down to and I think we’re having the wrong conversation, as as a profession, and the conversation always goes to how am I going to get paid? Okay, forget, how are we going to get paid? Okay, understand why we get paid. So, how did you know that you needed to buy life covet in the first place? Okay. And, again, it’s a bit of a trick question, because you are a financial planner yourself. So you know, the importance of that.

Louis van der Merwe
Can I answer that? Yes, I think it’s worthwhile having that discussion, my experience with the claims process of dealing with a few clients where their husbands have passed away when the insurance was with the bank, and this was specifically to settle our bond. So the money goes back to the bond, it was so much easier. When the bank had the insurance linked to the bond. They didn’t ask too many questions. They just kept the insurance money, they process that much faster. And it was an emotional decision, because I don’t want my wife to go through a complex claims process when I am no longer here.

David Kop
So that’s spot on. Exactly. So you’ve had that experience as a financial planner, right? And that’s a personal experience. Now imagine you take that personal experience to clients and you can tell them based on my personal experience, I’m gonna recommend that you go with this not necessarily because it’s the best cover, okay, it’s good Kevin is gonna deliver exactly what you need. But guess what is going to deliver at the time when you need the least amount of of effort. That’s what’s going to come to You. But even if we take one step back, why did you go get life covered in the first place, regardless of who it was with. And that’s because you had a particular need, okay. And that need was not to pay off debt. I mean, let’s face it, nobody gets out of bed and gets excited about paying off debt. But that need was to make sure that your family is going to be okay if your income is not there. So when we start with that as the principal and, and we’ve done our investigation, we’ve done our discovery, probably not the right word. But we’ve done our discovery process to understand that at the core of it, what’s most important to me, is the two daughters and my wife, if something was to happen to my income, okay? Once we understand that, and then you recommend a solution to me that covers that, I’m going to do it no matter what it costs, no matter where it is, and, and that’s what’s important. So if we start with the, why is financial planning valuable, and financial planning is valuable, because we are able to see blind spots in our clients lives. And we are able to help them solve problems, which they may not know existed, okay. So, as a client, I might not have known that if I go take external insurance, when the time comes for my claim to be paid out. It’s going to be paid out because we with reputable companies, but the process that it goes through might be protecting costs stress from our F. Now I’m giving you something which is removing that stress. Okay, so yes, we’ve looked after the financial matter, but we’ve also looked after the wellness of our clients. And that’s why we get paid. Okay. The second question we got to ask is, what do I get paid? And this is where the sense of fairness needs to come in. Okay. So if a client comes to me and says, Look, I’m getting bombed cover, I just need a million rounds worth of life cover, please put a million rounds of cover in place to me and you go through all your disclosures and the legal discussions, and the client says, Look, I just need this. And you able to do that in the space of an hour, okay? Versus a client, who you sit down with and go through a full process determine they need a million rounds worth of cover. So same solution for each client process to get there very different, you get paid the same amount of money for that. Okay. So that’s where we got to start asking what is fair. And when I say what is fair, we always look at it from a client viewpoints. And that’s important. We’ve also got to look at is what is fair from an advisor viewpoint? What is fair from a business owner viewpoint? Because let’s face it, again, financial planning is not a charity. Okay? It is a business. And in all businesses, people get paid. Yeah, we could say, well, doctors get paid a lot of money. And that’s unfair. But doctors have studied, they’ve done the need to get to the point. So yeah, I need I need an operation or something I need to pay for it. Same with financial planning, you need to pay for it. But what you pay should be fear in terms of the effort, and the process that the financial planner goes through. So this again, comes down to understanding, do you actually understand your business? Do you understand the cost of delivering advice to your clients? Because it’s unfair to if you don’t know that, and all of a sudden, you go and say, Well, look, I’m just going to charge you 1000 Rand for that. Meanwhile, it costs you 2000 Rand to put in place, okay, we shouldn’t have lost leading things. As far as planning witnesses, we should be paid for our professional time. So once we know what we need to get paid, and the client has agreed that is very, the client has agreed that you’re going to be paid this, we can then start talking to the client and say, Okay, well, there’s a variety of options for you to pay, we’ve agreed you’re going to pay me 10,000 Rand for this process, you can pull out your checkbook right now and pay me the money, you can go on a debit order, where we sign an agreement for the next 12 months, you’re going to pay me over those 12 months for the work I’ve done. Plus, you’re going to pay me a little bit extra for the ongoing work I’m going to do. But also, in order to help you from a cash flow viewpoint. If we do end up implementing the product, I can take my money from implementing the product. So I think one of the biggest problems with incentives in financial planning is they’ve always been opaque. They’ve always been misunderstood. If we bring them to light, if there’s total transparency and total understanding from the clients viewpoint, I think we can remove the discussion around the heart because everyone’s agreed that the value that we’re delivering is right, and we should be paid for it. Now we just figure out how we’re going to get paid.

Louis van der Merwe
David, that was such a nice way of putting it together. And as you were saying this, I kept on thinking about my own experience with product provides It isn’t actually, it’s not that important how much they get. But it’s important that they do get paid and that they get paid for the service that they deliver. When you go to a surgeon and a neurosurgeon, you probably don’t want it to go to the cheapest one either. I would suggest, especially if it’s free, some way they might be might be a problem. Like, many Yeah,

David Kop
as a service business, you start talking about your value proposition science. And traditionally, there’s, there’s three value propositions. Yeah, and this is now I’m putting on my my management, my management heads and management theory, you can, you can compete on price, you can compete on product, or you can compete on customer intimacy. Okay. Now, I don’t think that financial planners should be competing on price because it cheapens what we do, and quite often, products is not something that financial planners can compete on. Because the industry delivers products. And let’s face it, products have been commoditized a lot like you were saying, you can go on an app and get life cover, anytime. So what we compete on is customer intimacy. And I’m not talking about like climbing in bed with your clients or anything like that. But it’s knowing your clients so well, that you can give them the solution before they know they need it. So this is again, where it comes down to what financial planning is about is about knowing my client better than they know themselves.

Louis van der Merwe
I couldn’t have expected for a better way to end this conversation. David, I want to urge people that if they want to compete on the customer intimacy, branch, or they even want quality questions around price and product that they they should reach out to you or Jason, what would be the best way for them to do that?

David Kop
Yeah, so currently, the best way is to look on LinkedIn. We’ve got FI Consult on LinkedIn and contact us through LinkedIn. Or email me directly on… can I give it out?

Louis van der Merwe
Yeah, absolutely. They can join the waiting list.

David Kop
Yeah.So David at FYI consult dot co dot za. And our website should be going live any day now. So you can start jumping on the website and looking at the things that we do there.

Louis van der Merwe
David, all the best for this future journey. As a former business owner, thank you so much of what you do for the profession.

David Kop
Thank you and thank you for what you do and for having these very important conversations.