Accredited firms have ditched the term ‘independent’ and ‘IFA’ preferring to use the term ‘financial planning’ in their description, a new survey has found, following on from the regulator admitting that consumers are confused by ‘independent’ and ‘restricted’ advice labels.
The Institute of Financial Planning recently completed its second ‘benchmark’ assessment of accredited financial planning firms, in conjunction with management consultancy the Phil Billingham Partnership, with an online survey in March with 42 of IFP’s 69 accredited firms taking part.
The survey found that more work still needs to be done on succession planning, marketing and capacity to grow.
Its conclusions were that firms are independent in regulatory terms, but do not describe themselves as such, rather they generally call themselves financial planners. In fact, while 62 per cent use financial planning/planners in their description, none use independent or IFA in their description.
The IFP did not detail why, however an FCA paper, published at the end of last year, acknowledged that consumers do not understand the difference between restricted and independent advice.
David Geale, the FCA’s head of policy, previously told FTAdviser that a consultation into advice labels may see such ‘tagging’ being ditched in favour of a more qualitative approach, looking at how services are described to consumers.
The IFP are also increasing marketing activity, in particular by using social media as well as increased engagement with local press, but still have a long way to go on this front.
Phil Billingham, director of the eponymous consultancy firm, told FTAdviser that capacity is the main problem with marketing. “It’s mostly reactive, not pushing things, so even if firms get referrals, most wouldn’t be able to handle say 50 new clients anyway.”
In terms of attracting new clients, the research found that the most common route was via referrals and introducers, while the least common was bought leads, profile and direct marketing, with ‘some’ using services like Vouched For and Unbiased.
Mr Billingham explained that while accredited firms are aiming to grow, this has to be done without losing things like client focus and levels of personal service.
Data analysis carried out for the IFP by Manchester Metropolitan University found that big firms have lower operating costs and higher turnover growth on average, but suffer from more complaints.
Smaller firms meanwhile, have more level six qualified planners and their administration people also have higher level three qualifications, with staff generally wanting to stay with smaller firms longer than bigger firms.
In terms of succession planning, the IFP urged firms to develop leaders and scale, with Mr Billingham suggesting adding more principals, preferably those with operations experience, to help grow businesses without losing what made them great to begin with.
From the survey data, most accredited firms have between 50 and 100 clients per planner, with an average of two planners per firm. This equates to an average of £89m under influence per firm, with roughly £22m per adviser.
Steve Gazzard, chief executive of the IFP, added that to become accredited, firms undergo rigorous assessment in relation to their activities and structure, having to prove that they continue to operate at the highest ethical and professional standards every year.
“This includes the requirement for having at least 50 per cent of registered individuals qualified at level six or above.“
peter.walker@ft.com
