Financial advisers – or financial planners as many prefer to be called – belong to a profession that has the power to change people’s lives in profound ways. When I first joined this industry, financial advice was often nothing more than product sales. I’m delighted to say, that I’ve seen adviser practices developing into client focussed professional businesses.

There’s still a way to go in some areas but adviser businesses are focusing on the holistic needs of their clients and shaping advice to their benefit, helping them to reach their life goals. On many occasions, it’s about informing the client that their goals are not achievable, unless the client faces the cold facts that their savings, investments and time-lines are modified, monitored and reviewed on a regular basis.

Justifying commissions and/or fees is certainly something which adviser businesses are now fully explaining, as most clients will not understand the value that advisers bring to their life planning.

The Retail Distribution Review in the UK has helped focus on the service that the adviser provides to their clients and the tremendous value that a professional overseeing a clients’ holistic needs can provide.

In the UK, following the introduction of the Retail Distribution Review (RDR) in January 2013, the number of advisers employed by banks to sell product reportedly dropped by 44% (Money Marketing, 27 March 2013). That, together with the introduction of pension freedoms in 2015, has seen a surge in demand for independent advice, with many UK advisers now able to pick and choose their clients. Advisers have told me that they are benefiting from more job satisfaction, work in a more impactful way with fewer clients and are rightly being recognised as professionals on a par with solicitors and accountants.

In Europe, the regulators are currently reviewing the way advice is paid for and irrespective of the outcome, this may be the catalyst for advisers to look at their client propositions.

Ultimately, it’s the impact that the advice has for the client that is the most important consideration. Advice that is self-serving is no good to the client however it’s paid for, but working with a competent financial planner is priceless.

Several studies have attempted to quantify the value of having professional financial advice, with estimates ranging from 2% to 3% p.a. (a figure referenced in the Vanguard Adviser is Alpha study) increase in wealth generally considered to be reasonable. If an asset manager alone could reliably generate 2% to 3% p.a. of alpha they would have books written about them!

A good financial planner acts as a “circuit breaker” preventing their client’s natural tendency to want to time the market, pick stocks or chase the performance of the latest hot funds. The really good ones do this by using behavioural coaching, helping their clients to recognise the traits that may be holding them back from achieving their financial goals.

As Ben Graham, mentor to Warren Buffett said; “the investor’s chief problem and even their worst enemy, is likely to be themselves.” Around half of the adviser value in the Vanguard study is derived from behavioural coaching.

Recognising our own shortcomings and limitations is a necessary step to effective financial planning, but more significant than that, even, is recognition people don’t really have financial goals, but rather lifestyle goals that have financial implications.

This article first appeared in the July edition of The Trade Press publication.