In this installment of Weekend Digest, we cut through the maze to give you a summary of the interesting stuff so far this week. Click on the title to read the article in full (opens new window). So here goes.
In this blog, Aussie Consultant Jim Stackpool makes an important point about advisers who are converting into a fee-for-service without actually changing their core client proposition. He likens them to dodgy renovators; they might get away with it but not for long. ‘Hidden underlying cracks, decay and potential structural weaknesses won’t withstand the rigorous tests of time, weather and knocks.’ Stackpool noted.
He asserts that advisers will ‘have tough conversations with clients if they try to masquerade a product-based proposition as a valuable service-based proposition’
Stackpool identifies 3 models that won’t cut it in the ‘service-for-fee’ world….
- Cheapers: This ‘we-are-saving-you-money-compared-to-someone-else’ proposition isn’t a fee-for-service proposition and puts an adviser’s future at the mercy of someone else’s pricing.
- Cost savers: This is a proposition based around “we saved them £20,000 in tax, so we could justify our £5,000 fee!” or “our investments made them £80,000 in just one year, so they could see the value in our £7,000 fee!” Sounds good? Well, the problem is ‘how do you justify your fee in the years that they withdraw funds from your platforms…., or the market sinks, or their tax bill or insurance underwriting cost increases?’
- On demand: “We’re here whenever you need us” isn’t a service proposition.
Stackpool recommended that a service proposition should be based client’s financial complexities. Whether it’s due to their lack of time, experience, expertise, objectivity, desire, ability, or knowledge, they realise that they can’t solve their financial complexities themselves.
This brings to mind an earlier article in Citywire this week, in which Dennis Hall of Yellowtail said he is focusing his service proposition around widows and couples with terminal illnesses. This ultra-niche approach is a great example of service propositions based around client’s financial complexity and goes against the grain of traditional growth model in financial service of selling more services to more people. Instead, Dennis’ plan is to narrow down the focus. ‘I don’t want to be all things to all people, and would rather be highly visible to our intended market and invisible to everyone else’ he says. Lots of wisdom in that!
Ask a platform-man and he’ll tell you that platforms are the life-blood of an IFA practice; without which an adviser can’t really function in the 21st century. Makes you wonder how advisers coped before platforms turned up, doesn’t it? So, what do advisers think? What is a platform anyway?
According to this survey by Platforum, about half of advisers believe that a platform is a business partner for an IFA to run his/her firm – ‘it’s a service.’ However, a quarter of IFAs thinks it’s a technology and a delivery mechanism – simple ‘a bit of kit.’
This might just be a problem with English Language but if a platform is a service, then one might ask: a service for who? For the client or for the adviser? Well a clue might lie in the question on who should pay for platforms. It’s a close call between those who think the adviser should pay (46.2%) and those who think the client should (41.2%).
While a quarter of respondent believe that managing their own investment proposition in-house is the best way to deliver a good client outcome, a huge majority ( 66.1%) say IFAs should focus on giving advice but shouldn’t touch investment management with a barge pole. Perhaps I should consider setting up shop as a DFM or Multi-manager then? Business would be good for those lot come 2013.
Guess what the biggest concerns for IFAs in 2013 are? ……………………….. and ………………………… Yes, you’re right!
Standard Life has written to advisers warning that their bread and butter, aka ‘existing trail’ might be at risk, unless they get signed client agreements for ALL legacy incomes.
“Regardless of how your existing remuneration was described or funded, your existing revenue is at risk from the FSA’s legacy business rules until you have the appropriate client agreement and disclosure in place and can confirm this to the provider facilitating this arrangement” the letter says.
Oh dear, we were hoping we can delay those ‘advice events’ for later when everybody has a better idea of what they’re doing but looks like it’s going to need to happen sooner rather than later.
But is this a genuine warning by a concerned provider or a scaremongering attempt by a lifeco/platform with vested interest to drum up business, presumably from some of its competitors who aren’t ready to support AC yet? You guess is as good as mine!
This week has been dominated by hoo-hahs on Adviser Charging, following letters from Canary Wharf to Compliance Officers of platforms. Suddenly many ‘RDR-ready’ advisers aren’t so sure they are anymore. One adviser said ‘may be we should all re-train and become electricians or plumbers.’
Here’s a summary….. Brace yourself!