Over the past 12 months we have been looking at the various components of building a successful independent financial planning advice practice.
We have used the outlines of a conventional business plan to address the primary topics that the business owner should think about before taking that final step.
“Test fast. Fail fast. Adjust fast.”
A recent radio discussion considered why the British were generally not so good at business start-ups. The conclusion was that in many cases, business owners keep trying when something isn’t working. Other nations were considerably more open to the idea of just stopping, thinking and starting again.
We have discussed fee-charging structures, service levels, meeting structures, investment propositions, back-office administration systems, client advice processes, professional connections, marketing methods and so on. In all of these areas it is important to distinguish between those things which are fundamental to how you run your business and those that cannot be changed without changing the essence of how (and why) you want to work with your clients in the way you have been planning.
But there are many other areas where your decisions may not be so business-critical, where change is certainly possible, and may even be desirable. The advice from Tom Peters, the American management expert, is invaluable: if we persist for too long in trying to make something work then by the time we finally realise that it actually isn’t going to work it may be so ingrained in our business systems and processes that change is even harder.
Change is expensive, which is why all this forward planning is never a waste of time. On the other hand, persisting with something which simply isn’t working may prove considerably more expensive in the long run.
“Test fast” means getting things going quickly, keeping a balance between rash implementation and planning to the nth degree. “Fail fast” implies that you will keep all aspects of your business under constant review and work out very quickly that something isn’t working, instead of waiting to discuss it at your firm’s next annual away-day. “Adjust fast” suggests that having established what isn’t working, you try something new – which in turn you will test fast, decide whether it fails or not, and adjust fast if necessary.
This cycle of implementation, review and revision is, in Peters’ mind, a rapid cycle. It should involve all members of your staff, and if you work alone then consider using a business colleague or a mentor as a sounding board to your thoughts on these questions. It suggests to me at least that the business owner who takes this seriously holds a much more strategic oversight of the company.
However, while this type of oversight is not something to be left to your office manager, a good paraplanner and administrator will free up the business owner’s time to engage in the kind of strategic assessments, planning and development that are necessary to the continued growth, development and success of the business. This potentially means getting a little less involved in the day-to-day business of advising clients, but with planning, time management and clear job descriptions and roles, everyone should be able to work together to make your firm the best that it can be.
Ensuring compliance
There’s just one more critical decision that needs to be taken before you can actually open your doors for business. Compliance.
This could be one key area where you realise fairly quickly that you may have made the wrong decision, and where addressing the problem quickly is likely to be considerably better in the long run than simply struggling on before realising many months – or even years – down the line that nothing has changed and you still need to decide to move on.
Change will be time-consuming as well as emotionally and financially costly. But if it is the wrong decision, none of that will get easier by putting off change.
An internet search will quickly find many trade press articles which compare and contrast various options for firms when thinking about their compliance, by which I principally mean compliance with FCA rules.
There will be surveys that compare and contrast the various services offered by networks, and the costs and benefits of each option. For those planning to set up an independent firm, the principle question is the extent to which your compliance services support your firm and its business philosophy.
My advice is to set out all the options as you see them. Get some pricing for various service levels and try to work out what each option provides. More importantly, work out what each option provides that you cannot deliver for yourself.
The debate about how to address financial services compliance seems more than ever to revolve around control. Many debate the degree of freedom that you as a business owner will have when making business decisions, formulating what service levels you will provide, what solutions you can recommend, and the degree of supervision under which you will need to work.
In the next piece I will go through the main options in a little more detail, but in the meantime you may wish to think through the following questions:
• Are there any gaps in my knowledge where I would benefit from access to in-house technical expertise which I could not source anywhere else?
• Are there products or services that would be available to me through my compliance provider that are not available, or would be more expensive, elsewhere?
• Would there be direct cost savings, or indirect time savings which make one route more attractive than another?
• Does my experience of running a business or advising clients mean that I would benefit from regular support and encouragement that I could not find elsewhere?
• Finally, is providing independent financial advice as important to my compliance provider as it is to me?
Thinking these questions through should lead you to a list of features that you would want to see in a compliance provider. Find other business owners and ask them about their experiences, which may highlight other questions you may want to ask.
The consideration of the range of alternative sources of support will help you to think through service costs. Last but not least, a compliance provider may well be a long-term business partner and the relationship should be supportive and not unnecessarily critical, constructive not destructive, challenging but positive.
Gill Cardy is managing director of IFA Centre
