24 June 2021
7 min read
The term "client-centric" is frequently deployed during discussions about financial advice, but what does it actually mean in practice?
Intuitively, one could say being client-centric involves the provision of services that are tailored to the individual client's needs. But how are those needs determined? To what extent are they taken into account when building a client strategy (including the selection of financial products)? And is it even possible, at a time when there are multiple factors driving up the cost of service, to be truly client-centric at scale?
The practical answer to these (and other related) questions often involves some degree of segmentation, whether based on age, generalised financial goals, an understanding of the client's risk tolerance or a combination of these and other factors. In this way, advisers can serve a larger customer-base without having to reinvent the wheel every time a new client comes on board. It's a tried-and-tested way of running an advice business and it usually works out very well.
Except, of course, when it doesn't.
As a Muslim, Hakan Ozyon struggled with the traditional paths to building wealth as most involved products or services that were incompatible with his beliefs. The guiding principles and prudential standards of Islamic finance have been developed and iterated on since antiquity and have become increasingly complex as Islamic financial institutions intersect with the broader market. You may be somewhat aware of the idea that the Quran prohibits usury, for example, but less so how that's interpreted today and to what extent it applies to the US$2.2 trillion global Islamic finance industry.
It's that lack of awareness, Ozyon says, that has left many Muslims in an unfair predicament: having to make a choice between "disregarding their religious beliefs or being left behind in the wealth race."
"There is a lack of understanding on Islamic finance among the broader Muslim community," Ozyon says. "This, unfortunately, is something some advisers exploit by providing a conventional product and claiming it is Islamic-compliant or simply convincing their clients’ that there are no other options. This issue is widespread because it is unregulated and there is a general lack of understanding in the community."
We don't have exact figures on how much money has either been left on the table (due to concerns about strategies and products' Islamic finance compatibility) or invested without regard for Muslim clients' faith in Australia, but either way this is an area where the most common client segmentation models are falling short. It's a complex topic that Ozyon says necessitates a specialist skillset.
There is a lack of understanding on Islamic finance among the broader Muslim community.
"Advisers should steer clear of providing advice or products for a Muslim client," he explains, "unless they have comprehensive specialist training on the matter. This is very detailed subject matter that we're talking about and it cannot be understood by acquiring a superficial level of knowledge. Islamic finance and investments are a specialist field that require many years of experience and knowledge that very few possess in Australia."
It's this specialist training that put Ozyon in the position to establish Hejaz Financial Services, aimed at working with a large but chronically under-served part of the Australian market. Largely due to its unprecedented nature in Australia, there were numerous challenges involved in creating Hejaz; according to Ozyon, the company essentially had to be "built from the ground up".
"This meant training of employees in a specialist field," he says, "and a certain level of education among the community to ensure trust in Hejaz. Community trust is foundational for us, and something we hope to continue to build."
Despite the specific skills, considerations and knowledge essential to delivering on the Hejaz vision, Ozyon doesn't see the business as a small fry in the advice space - in fact, his rough aspiration is 200 advisers under the Hejaz license.
"Hejaz is built by advisers for advisers," he says. "Central to our offering are capped-price licensee services, an open APL and a practical, customer-first approach towards compliance. We want to work with advisers who take a customer-first approach, who sincerely care for clients’ needs and who want to provide the best possible services suited to them. We provide solutions, rather than simply selling products and services, and Hejaz Financial Services offers advisers the opportunity to work with like-minded colleagues towards this goal."
Ozyon cites Hejaz's technology as a further value proposition: "It plays a crucial role in ensuring clients and advisers are maximising efficiency. Hejaz is certainly leading the way in building a comprehensive back-end technology solution and interface, as access to products and services must be seamless and paperless where appropriate."
Given where Ozyon wants to take the business, he doesn't see it as being limited to an exclusively Islamic client base, either. "While our services are particularly aimed at the Islamic community," he says, "we also serve the broader public. Our offering is suited to any client who has requirements around socially responsible investing, clients who do not want to invest in socially injurious activities, or clients who genuinely want non-generic products and services."
What can one learn from Hejaz's success thus far? After all, the business has steadily grown its client-base to over 3,000 since 2014 - and around 1,000 of those signed up in the fallout of the Royal Commission, at a time when the general public's position on financial advice was arguably less charitable than ever. So what's the lesson here, even for those advice businesses without a specifically Islamic bent?
I believe the industry must learn from past mistakes and gravitate towards change to ensure its survival.
"I believe the industry must learn from past mistakes and gravitate towards change to ensure its survival," Ozyon says. "We started out as a specialist boutique firm and we have only gone from strength to strength over the years, while the remainder of the industry continues to face challenges. This is a clear indication of a formula that works in an evolving industry."
Elaborating on what that formula is, he says: "Our foundations are all about finding solutions to financial problems and building products that are in demand, rather than providing generic products to clients that aren’t suited to a particular need. We must understand our clients’ pain points to provide the best products and services possible.
"Specialising in various fields of financial expertise will allow firms to thrive, but will also ensure best interest duties are met. However, it is essential that the motivating goal is not financial and rather that the clients’ requirements are indeed catered for."
Ozyon hopes that, over the next five years, the advice industry doesn't "revert to previous bad habits to encourage adviser numbers to grow again." Instead, he says it should transform into a fully fee-for-service model where licensees employ "stringent recruitment programs to ensure that only the best candidates remain in the industry."
With this approach, he believes that advice will not only survive but thrive in the Australian market - as long as advisers can demonstrate that "the care for the client and target market is genuine".
"That's the best way to ensure your brand is trusted and that you become a partner to your community."