Weekend Digest for Financial Planners/Advisers & Paraplanners (5th & 6th Jan)


Here’s the latest installment of Adviser Digest, with a summary of the interesting articles this week. Click on the title to read the full article(opens new window).                                                                                                                                                                                                                                                   


Beware Of Clairvoyants and Economic Forecasters!

It’s that time of year again; clairvoyants clocked up as experts fall over one another to register their predictions of for 2013.  Writing in the FT, renowned economist John Kay reminds us that there are few certainties about the future other than that it is uncertain.

Drawing valuable lessons from Nate Silver, the young statistician who became an unexpected hero of 2012 after correctly calling the American election for Barack Obama, Kay attempts to make a distinction between diligent data analysis and well…. crystal ball gazing that tends to attract lots of attention.

Forecasting in business and finance is nothing like predicting election results.  Kay observed that ‘in elections,  the problem is well-defined – the candidates are known, the process of choice defined in legislation, the result a matter of public record. The issues lend themselves to probabilistic reasoning – the mathematical properties of sampling populations are well understood.  But most of the problems we face in business and finance are ill-defined and open-ended. We often do not really know the answers even after the event. We cannot envisage the full range of possible outcomes, or the options available.’

It is only natural that we crave specific knowledge of the evolution of complex systems and often we pay good money for the services of clairvoyants and economic forecasters. But such knowledge is rarely available. Nor, even if it were available, would it often be useful.

So as the predictions roll in, be it on house prices or on where the FTSE is going to end up in 2013, advisers (and investors) are urged to pay them same attention you would a fortune teller.  ‘Most people who hire fortune tellers have the good sense to treat their prognostications lightly. The activity is casual fun, its value – if any – is as provocation to think carefully about the present rather than a measure of gaining knowledge about the future ‘ Kay concludes.


High Court Verdict on Redress Compensation: Implication for Advisory Firms

 This article in MoneyMarketing by Harriet Quiney of Fishburns LLP highlights the implications of the recent High Court verdict in the case of Clark & Clark Vs. In Focus Asset Management & Tax Solutions Ltd. The court held that an investor can bring a substantial complaint to the Financial Ombudsman Service, accept the maximum amount FOS can award (currently £150,000 but £100,000 at the time that an award was made to the Clarks) and then sue for any balance in court.

While this verdict does not overturn an earlier High Court’s  decision (in case of Andrews Vs. SBJ Benefit Consultants Ltd) which held that investors cannot do this, it does open up a number of issues for adviser firms handling  complaints where client is claiming more than £150,000 (or £100,000 if the complaint was issued prior to 1 January 2012)

While it is expected that In Focus will appeal the decision at the Court of Appeal, Quiney points out that in the interim, firms will need to take extra care where FOS has found in favour of the complainant. “The firm is not required to pay any sum recommended by FOS over and above this amount and, just because FOS finds in favour of the complainant, it does not necessarily follow that a court will do the same. That said, the additional cost of litigation and the knowledge that the complainant now has a fighting fund may mean that difficult commercial decisions have to be made.”


8 Ways to Get More Referrals

 This great article in US-based Financial Planning Magazine by Marketing Consultant Robert Sofia  of  Platinum Advisor Strategies is a great reminder of simple yet effective ways advisers can get more referrals.

Sofia reiterated that simply asking for referrals isn’t enough. So, here are 8  ways to fill your diaries with new referals this year

  1. Surprise and Delight Your Clients:  While your clients probably won’t be in a hurry to talk about the annual review you had with them, they will brag about how you threw them a surprise wedding anniversary party. Or if you have their cars washed, if it’s dirty when they come in for an appointment? Or give them a ‘World’s Greatest…’ hat or sweater!
  2. Request Direct Introductions:  If your client has a contact you would like to meet, ask for a direct introduction simply by saying  “I know you’re friends with So-and-so, and I’d really like to meet her. What are the chances the three of us could grab lunch together? Is that something you could set up?”
  3. Host Intimate Social Events: A perfect opportunity to meet new prospects without spending a lot of time or money is to plan an activity you enjoy and invite a few clients along. Fishing, golfing, or skeet shooting  (bird, not people!) and  for the ladies,  a cooking class, a pedicure party, or a wine tasting (no pun intended).
  4. Give Away Prizes:  The next time you hold an event, put a blurb on the invitation that says something like: “Every client who brings a new referral to this event will receive a …… “ Bottles of wine, bbq grill sets, gift certificates,  you name it.  Sounds a bit cheeky? Yes, but it works, apparently.
  5. Forge Alliances With Other Professionals
  6. Invest In Your Web Presence
  7. Talk About (Don’t Ask for) Referrals at Every Meeting
  8. Reward Referral Behavior: Celebrate every referral, regardless of the quality!


 RDR Will See Advisers Drop But Paraplanners Grow

Estimates vary widely on how many advisers are expected to leave the industry as a result of RDR.  The FSA’s  estimate of about 5% is in stark contrast to predictions by Ernst and Young’s  30%. However, one thing they all agree on is that the number of advisers will fall post RDR.

Nick Cann of the IFP is quoted in the FTAdviser as saying that “by the end of 2013, it is my belief that the numbers of financial advisory firms and independent advisers will be far fewer than those currently being predicted”

“There will be a growth in the number of recognised paraplanners and the really important role that they fulfil in successful financial planning business…. There is a need for a concerted effort to improve consumer understanding of the importance of financial planning and how they can engage at an appropriate level.” He said.

Mr Cann’s view is in line with our recent survey of advisers on the value paraplanners  in the post-RDR world, as 75% of advisers believe that paraplanners will become more valuable in the next 12 months. The results of the survey are due out in NewModelAdviser on Monday and will be on this site as well.


Business Model Changes Will Dominate 2013

 ‘2013 will come to be seen as the year of the business models’ says Richard Hobbs Richard Hobbs regulatory consulting at Lansons of this article in Fundweb. Hobbs noted  that as RDR drives advisers to  operate  new or revised business models and the regulator itself will be operating a revised model, there is some pains for advisers in the weeks and months to coming.

While RDR has been widely written about, it is important to remember that, the new regulator, FCA will gain its legal powers, rely more on thematic work and cut back on the number of firms that will receive dedicated supervision from teams of supervisors.

“ The FCA may be expected to start its thematic work on RDR compliance quite quickly in the New Year. It has signalled its preparedness to change the RDR quickly if it is not working as hoped. But before that its themes are likely to be around holding out (whether a firm claiming to be independent really is), whether charging conforms to their view of it, or whether commission effects are being created, and indirect benefits.’

Firm must be prepared to revise their business models as regulatory pressure  but from the FCA and the EU (Mifid II) bite.



I hope you have enjoyed this and hopefully it’ll make you job a little easier! As paraplanners, that’s what we do! As usual, thought and comments are welcome. Enjoy your weekend!










Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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