While there are fears that robo-advisors may pose a threat to the profession of financial planners, Aurora Tancock's belief is that robo-advisors will be able to perform some of the functions but they will not be able to replace the value that professionals bring to the table.
“A robo-advisor will provide the answer to the questions that are asked, but the financial planner will ask the questions that the client may not even have thought of that may be crucial to what he or she is trying to achieve,” said Aurora at a 2018 MDRT Annual Meeting focus session.
For example, she said that when purchasing a home, it isn’t just about how much one can qualify for. “We need to look at whether or not the mortgage will put a strain on our finances. We may qualify for the mortgage, but can we afford it? Is the life insurance we put in place going to cover the needs of the family now as well as in the long term? Is saving toward education costs going to be a priority over saving toward retirement? Do we pay off the mortgage or increase how much we are saving toward retirement?”
A lot has changed since she started in this business 19 years ago. Life has become much more complicated and fast paced.
“We have a lot of information at our disposal but not always the time to implement it. And is all the information on the internet correct? A small amount of knowledge can mislead people into thinking that they are more of an expert than they really are,” she said.
She quoted one of the greatest hockey legends, Wayne Gretzky, “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”
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“As the use of technology increases in everything we do, advisers need to look at what we are currently doing that can be taken over by a robot and what service we can provide that may be much more difficult to replace by automation. Our strength will come from providing a service, such as goal-based financial planning, by becoming their financial coaches and really understanding what is important to them and being there through whatever life throws their way to make sure they fulfill those goals. Robo-advisors may do a good job at managing money, but we do a better job at managing relationships,” she said.
Here’s how she gets prospects interested
Prior to becoming a financial adviser, she had worked on the administrative side of the business. She knew the products and how they worked, but didn’t necessarily know how to position them.
She tried approaching prospects regarding their life insurance needs, but, unsurprisingly, found that they were not as passionate about discussing life insurance.
She was getting frustrated until she decided to approach prospects about something they did want to talk about—building wealth and retiring comfortably.
She started asking prospects:
“Do you have a financial plan?” - Often they would say yes.
“Do you have a good idea what your income after tax is going to be in retirement from all sources?” Most of them didn’t know the answer to that.
And for those who did, her next question was,
“Do you know if this amount is going to be enough to sustain your lifestyle during retirement?”
Ninety-nine percent of the time, they didn’t have a clue. Those questions disturbed them, and she started to have success in having prospects agreeing to sit down with her.
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“This was my entry into the financial-planning world, and selling life insurance became a lot easier to position,” she said.
Investment plan vs Financial plan
Most often what she found was that they were under the impression they had a financial plan, but what they really had was an investment plan.
These two terms are often used interchangeably, but there is a big difference between the two.
The investment plan is just that, a plan to save toward a goal, often retirement, and stick to it based on risk tolerance, diversification, and asset allocation to maximize returns.
A goal-based financial plan involves assessing every aspect of the client’s financial life. It’s looking at the big picture and not at each goal in isolation.
Getting the clients to understand this is key, especially in today’s world, she said.
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