I was watching a presentation yesterday. It was about an investment bond and the tax advantages.
The presenter proceeded to compare two strategies based on the clients receiving a lump sum.
No gold stars to the one that created the better financial outcome.
Although there was nothing wrong with the proposals, there was nothing really right about the comparison. Looking at this at face value, I felt like I was being duped. Did the presenter really think that this comparison was proving anything to the adviser in the audience? If anything, this comparison alone reduced my confidence in the product (whether warranted or not) because it felt like a little bit of ‘smoke in mirrors’.
What can I learn from this?
When you consider alternative strategies in the SOA, these are often discounted but can be a very powerful section. It’s a section that shows the client that you have considered all plausible options and the one you’re recommending is the best and why.
However, I want to emphasise the value of the alternative.
Let’s use the above as an example. If an alternative here was to ‘pop down to the local RSL and feed all the money into one pokie machine because hey, you have to win eventually right?’ then obviously, although this is an alternative, it’s not credible, so we wouldn’t see this in the alternatives.
Which leads me to the question, if you had clients whose objectives were to invest this money, would Strategy 1 (above) be credible?
In the client’s shoes, if I were to see Strategy 1 in the alternatives, it would come across as ‘clutching at straws’ and essentially devaluing the advice, which, is the opposite to what an alternative should achieve.
From what I’ve seen the soundest alternatives have the following components:
They reflect the client’s considerations – look at file notes, consider conversations had with the clients where they may have talked about a new car or renovating, centre them around the clients goals.
Ask yourself, are the alternatives plausible? Would the client actually consider this an option?
Take into consideration products as well – there may be a particular super fund or share that they’re interested in. What would be the outcome of using those products?
Instead of putting the stock standard text in the Alternatives, use it as an opportunity to really qualify your advice to give the client absolute confidence in the recommendations.