There are three fundamental ingredients for running a successful business in a “post-RDR” world: delivering a service with a high perceived value by clients; improving efficiency; and avoiding regulatory problems and consequential reputational damage.
The following five tips are all focused on making improvements in each of these areas.
Tip 1 – Create perceived value by offering clients a bespoke service
There is a tendency to see a conflict between a personalised service and the need to create efficiencies, which can reduce the fees clients will be asked to pay. It is important in designing service propositions to hold on to what it is that clients value most.
Clients seeking advice are individuals with different circumstances and concerns. Advisers, uniquely, are able to offer a personalised service. Where better to start than with a bespoke portfolio?
Most clients prepared to pay fees will have existing investments which need to be taken into account. Providing an on-going review and rebalancing of these investments is clearly a high-value service. Interestingly, regulatory pressures are also pushing advisers in this direction as the FCA has stated clearly its concerns about investment “churning”.
Tip 2 – Avoid inadvertently ‘dumbing down’ to reduce costs
The threat to advisers, like the travel agents before them, comes from the internet. How many travel agencies survived by selling airline flights and packaged holidays? The survivors offer tailor-made holidays.
Advisers should avoid being seen to offer “sausage machine” advice, otherwise they will undermine their perceived value in the eyes of their clients. Using risk-rated funds and centralised investment propositions (CIPs) risks being seen as such. Clients with advisers offering risk-rated funds may conclude that this apparently low value solution is better purchased via the internet.
Tip 3 – Improve efficiency by connecting up processes
In the run up to the RDR, comparatively little was done to connect the different tools which advisers use with client management systems and transactional platforms. Many advisers have yet to exploit fully the efficiencies of using an integrated and consistent set of planning tools.
Rekeying client data from one tool to another is time-wasting and prone to error. Streamlining and ensuring consistency of processes together with investment in IT will be essential for long-term success.
Tip 4 – Improve efficiency by letting clients do more of the work
Providing a client website with engaging tools will not only enhance the perceived value that advisers offer clients, but can also make a major contribution to improving efficiency. Clients can undertake some of the preliminary steps in the advice process themselves eg providing fact-find information, answering risk-profile questions, understanding risk-reward trade-offs, etc.
Giving clients the option of doing some of the low value-added administrative work can give them the flexibility to reduce fees if they wish and enhance perceived value for money. An attractive and engaging website is also a great way of staying in touch with clients who are not prepared to pay for an ongoing service but nevertheless may reach out for advice when a big financial issue arises.
Tip 5 – Avoid regulatory problems
The major thrust of the changes brought about by the RDR was to “professionalise” personal financial advice. While this is not a change in business philosophy for many advisers, there is a real risk that the industry suffers reputational damage from future regulatory problems arising from accusations of churning.
The FSA/FCA has issued several warnings about the use of platforms and risk-rated funds where these are not clearly in clients’ interests. Justifying selling good investments to invest in risk-rated funds so that there is a match to clients’ risk profiles is just such an example.
Bruce Moss is strategy director at eValue
