presentation at pfis 2014, adelaide financial planning value proposition: laying the groundwork...

Presentation at PFIS 2014, Adelaide 1

Financial Planning Value Proposition: Laying the Groundwork(research in progress)

A/Prof Mark Brimble, Griffith UniversityLujer Santacruz, University of Southern Queensland


AcknowledgementThis research is made possible through a grant provided by the Financial Planning Education

Council.


Research objective

To lay the groundwork for developing value propositions for personal financial planning services by investigating a range of issues such as:– the reasons for seeking advice– financial and non-financial outcomes– drivers of successful long-term adviser-client

relationship


Expected contributions

• Advance academic discussion on value propositions for personal financial planning.

• Generate marketing and service delivery insights useful for industry participants.


Research approach

• Phase 1 will involve a literature review and semi-structured interviews of a few advisers and clients that will inform Phase 2.

• Phase 2 will involve the development of an online survey and its administration among advisers and clients across Australia.


Literature review on value proposition

• Value is the difference between the benefits of a product/service and its price with customers basing their choice on whichever would create the most value for them. A progressive business can look at itself as a value delivery system in choosing the value, providing the value and communicating the value to the customer (Lanning 1988).



• An experiential and relational definition of value proposition is “an organisation’s offering to customers representing a promise of benefits or value that customers will receive during and after the usage experience, identifying both product and experiential benefits and costs that result from the relationship between customer and organisation” (Payne 2014).



• Value proposition is more than just product positioning as it is the essence of the firm’s mission (Webster 2002).

• It is also referred to as a statement of the firm’s core strategy (Lehmann 2005).

• It is recognised as the first of several elements in formulating business models (Lindgardt 2009, Morris 2005, Voelpel 2004).



• However, most value propositions do not resonate with customers (Anderson 2006).

• Most organisations do not go through a rigorous enough process and their value propositions are more an afterthought (Lanning 2009).

• While companies routinely use the term, less than 10% formally develop, communicate and use value propositions (Payne 2014).



• A further expansion of the value proposition concept is co-creation of value, where the customer determines value and participates in creating it in the process of consuming the service (Vargo 2004).

• This extends the traditional view of value creation from providing goods/services to supporting customers’ value creating processes (Saarijarvi 2012).


Literature review on value propositionValue co-creation can have the following components: customer processes, supplier processes and encounter processes (Payne 2008). An example for a travel company:


Previous research on financial planning value proposition

• Most previous studies on the value of financial advice centred on the economic dimension – Australia (KPMG 2011), UK (StandardLife 2012), Canada (IFIC 2012).

• Financial planning is “the process of developing strategies to assist clients in managing their financial affairs to meet life goals …” (FPA 2013). Clearly, the expectation of economic benefits is integral and a value proposition would involve more.

• A scan of the literature yielded no previous scholarly research specific to value proposition for personal financial planning.


Literature review on service quality measures

• Improving service quality is a key strategy for improving competitiveness (Yang 2003).

• It is also linked to customer satisfaction and loyalty (Jamal 2009), market share (Keyon 2012) and long term survival (Robledo 2001).

• There are numerous models for measuring service quality but the most widely used is SERVQUAL (Parasuraman 1998). It looks at five service quality dimensions: tangibles, reliability, responsiveness, assurance and empathy.


Literature review on service quality measures• There have been criticisms (and extensions) but SERVQUAL

remains a useful instrument for service quality measurement (Ladhari 2009).

• It is also a consistent model that facilitates cross time, industry and function comparison (Pitt 1995).

• In financial services, service quality has been linked to profitability (Soterious 1998) and customer retention (Zahorik 1992).

• Among Australian banks, key financial measures are all positively related with service quality measures (Duncan 2002).

• Little previous research applying service quality to personal financial planning.


Interviews with financial planners

• Does your firm have a client value proposition (CVP)?

• What is your firm’s CVP?• What do you think are the key success factors

in your relationship with long-term clients?


Interviews with financial planners• 14 interviews conducted.• Ranging from planners to owners/planners.• Practicing 2-5 yrs to >20 yrs.• Age 20-30 yrs to 51-60 yrs.• Qualifications from Diploma to Postgraduate.• 9 male and 5 female.• 9 says they have CVP, 2 says it is more a mission

statement, 3 are currently developing one.


Client value propositions• Better retirement outcomes. Assist clients in protecting their lifestyles

and growing their wealth.• Giving people the ability to focus on what they like and do best and

achieving their (realistic) goals without having to worry about the financial side.

• Helping clients afford their dreams by providing sound strategic planning which if implemented should give them the peace of mind that comes from being financially secure.

• Points of differentiation are qualified advisers, dual accounting and adviser role, client education, being part of a large adviser group and broad commitment to professional development.


Client value propositions• It was more generic information with flappy words like

integrity, objectivity and independence, although I think actions are greater than words.

• Good honest advice to find the best strategy for the client without getting them into an element of risk that is too great or is not appropriate for the client’s situation.

• Wealth truth, which represents being transparent with clients on how financial advice functions. Using expertise to help clients understand what real wealth means to enable them to add value to it and achieve their goals with efficiency and transparency. Business process consists of context-decision-action.


Client value propositions• Being passionate about working with people to help make their

dreams a reality and improve their financial resilience to cater for the many vagaries of life. Helping clients set clear financial goals and then act as guide through the financial complexities of life, ensuring that opportunities are pursued and risks are managed. This can give clients the confidence and peace of mind that they can live the life they want and make their dreams a reality.

• Helping clients make the most of their financial and lifestyle opportunities while avoiding costly mistakes. Educating clients so they are making informed decisions. Embracing the values-based advice process to align values with goals with strategy and with action plans.

• Quality advice to secure the client’s future.


Relationship success factors• Quality holistic advice that is relevant to the client as an

individual.• Openness in communication and adviser being always available.• Client having peace of mind and confidence in what is being done

and where going.• Objectives being relevant and being on track to achieving them.• Long-term nurturing relationship based on honesty, trust and

professionalism.• Ongoing client empowerment and client education.


Relationship success factors• Involved review process with adviser being on top of changes

in client situation, rules and market developments.• Focus on client and their interest and having a good

understanding of their goals and situation either as individuals or as a couple.

• Managing client’s expectations.• Economic benefits for client.• Appropriate protection of assets and persons.• Reasonable and transparent fee for service.• Client understanding and listening to advice.• Strategy first, product second.• Staff who genuinely loves to help people.


Interviews with clients

• Does your adviser have a client value proposition (CVP)?

• What is your adviser’s CVP?• What do you think are the key success factors

in your relationship with your adviser?


Interviews with clients• 6 interviews conducted.• Getting advice 2-5 yrs to 6-10 yrs.• Age 31-40 yrs to 51-60 yrs.• Qualifications from Diploma to Postgraduate.• 2 male and 4 female.• 3 says their adviser has a CVP, 3 says they do

not have one (that they know of!).


Client value propositions• I think it was around their expertise, the services that they

would provide, the assistance that they would give to you and the fact that they charged a flat fee for service.

• I do not pay much attention to that sort of thing. I have been told numerous times but I just do not recall.

• Not sure. Giving advice to safely invest money and protect asset base, not to get best short term returns but focus on achieving our long term goals.

• No idea. Look after their clients, do the best they can, help them have a good retirement.

• I do not really see her much, should see her more.• More general statements in terms of what we are trying to

achieve.


Relationship success factors• Having peace of mind, being confident of where going and tracking

well against goals even if they sometimes have to be altered.• Feeling of security from doing the right thing and being on reliable

hands with a qualified professional.• Relationship built on trust, confidence and honesty.• Professional investment advice that broadens opportunities for

returns at an appropriate level of risk.• Being educated and empowered in making financial decisions.• Holistic advice including other areas as insurance and estate

planning.


Relationship success factors• Involved review process and being updated on economic

developments and legislation and changes to strategy.• Open communication and can always talk to adviser.• Tangible help in maintaining lifestyle and achieving goals

particularly retirement security.• Good knowledge of client and continuity of service even by

different staff in the firm.• Reasonable fee for service that lessens the impression of

conflict of interest and that is justified by the value of advice received.


Summary

• Little evidence of systematic use of CVPs• Planners focus on goals, outcomes, wealth

creation• Long term clients focus on peace of mind,

information, wealth protection, sufficient funds to live well.

• Both focus on trust.


Next steps

• Nov and Dec 2014 - Design and pretesting of an online survey

• Jan 2015 - Administration of online survey to advisers and clients around Australia

• Feb 2015 - Analysis of results• Mar 2015 - Presentation of final report• Any ideas of accessing long term clients?


Thanks for listening.

Lujer is happy to take questions!

presentation at pfis 2014, adelaide financial planning value proposition: laying the groundwork...

Documents

creation of value

value proposition concept

value propositions payne

value delivery system

adelaide literature

adelaide acknowledgement

adelaide research objective

advice financial