The phrase “Knowledge is Power” is often attributed to Francis Bacon, the English philosopher and statesman who used it to describe the way to enlightenment and a better world. Two hundred years or so later another statesman, the third American president, Thomas Jefferson, also used the same phrase in correspondence referring to the creation of a learning facility in a key state. Move forward in time another two hundred years to today and the same phrase can be used to describe what the Financial Services industry is all about. Knowledge.
Knowledge in our industry is acquired from learning about products, processes, rules, regulations, principles, and best practice. Most importantly, it comes from our customers. In return, knowledge for our customers comes from ourselves through how we interact with them, how we show them ways to achieve their goals and aspirations, or how to resolve issues they may have. And through this knowledge, we have the power to enlighten and help our customers.
We acquire knowledge of our customers through documenting their financial circumstances through the completion of a financial questionnaire, otherwise known as a fact find. This is the foundation document for our records, although additional information may be added at a later stage. Since we are required to demonstrate “Know Your Customer” the fact find must be as comprehensive as possible. From a T&C perspective, my starting position when undertaking assessments of a meeting between an adviser and a customer, or through reviewing the contents of a file, is that although we know our customer, the question is just how well do we know our customer?
Unfortunately, it’s very rare that I see a fact find that I would consider to be fully completed
The compilation of a comprehensive fact find is fundamental to making a recommendation, and is an essential skill that must be demonstrated by the adviser, who should ask for information, challenge that information, probe for more information, and above all capture that information. However, the reality is that it is so much more than a box-completing exercise.
I was recently asked to describe what a fully-completed fact find would look like. My response was “When you have completed the fact find and you have no more questions to ask”. In other words it’s not what you know, it’s what you don’t know. That’s quite a strong statement, so let me give an example. A fact find might contain only hard facts such as the provider name and current valuation of an investment the customer has made. That’s fine. We know they have an amount of money invested. But what we don’t know is when they invested it, or how much they originally invested, or what funds they have invested in. Now there could be a number of reasons for this. The adviser might simply be focusing on the area of financial planning that the customer wanted to see them about. Perhaps the customer couldn’t remember? Some customers may not wish to give some information if they don’t perceive that a particular aspect of their financial circumstances may have a bearing on another. Or was the adviser not competent at getting down to the finer points, particularly the soft facts. We could find this out with the customer’s written permission, providing the adviser has decided that this might be relevant. There are also other soft facts that the adviser could have acquired, like why did they make the investment, and what do they expect from the investment, growth or income, or perhaps some other reason such as debt repayment or the purchase of something.
Why, you might ask, would we want this information when we’re talking about say, the customer’s retirement planning? Well, if the adviser knew what funds the customer is invested in, and these did not reflect the customer’s agreed risk profile, this might lead to an additional area to discuss. If the adviser knew that the customer had made the investment to fund the purchase of a holiday home in retirement this might help whatever recommendation the adviser makes for cash lump sums in their retirement planning. Unfortunately, it’s very rare that I see a fact find that I would consider to be fully completed, and when they’re not, there is a good chance that the adviser is missing an opportunity. Knowledge is power.
We use a term “Holistic financial planning” which refers the summarisation of the fact find and making either recommendations or suggestions across all areas of the customers’ financial planning. But is the fact find truly holistic? Has it just ticked boxes? A truly holistic fact find means that all areas have been covered and all questions have been answered. Personally, I like the Oxford English dictionary definition “Characterized by the belief that the parts of something are intimately interconnected and explicable only by reference to the whole”, which means the fact find needs to be fully completed.
In every aspect of our lives we are either given knowledge or we acquire knowledge. Much like the old adage “If it isn’t written down it didn’t happen” for recording information, so then “If you don’t ask you don’t get” must be true for fact finding.
Sometimes Training and Competence can be treated as a tick-box exercise. But this is an area where T&C can really add value. Like Francis Bacon and Thomas Jefferson we too can offer enlightenment and the creation of learning where we identify that advisers are not being truly holistic, and furthermore we can demonstrate that through the acquisition of knowledge they have the power to provide a wider service to the customer and also to pick up additional revenue.
Something to consider for 2019?