This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM-Cover-Small-210814.jpg
Categories:Advisers,Other

Cicutti: No reason IFAs can't build up scale

  • Print
  • Comments (30)

Many years ago, when writing about the need for a homogenised system of financial advice, where consumers from Land’s End to John O’Groats could be sure of receiving exactly the same standard of service, I glowingly recommended a business I sometimes visited - Snappy Snaps.

As everyone knows, Snappy Snaps is focused on printing pictures. Once upon a time, it was all to do with developing your holiday photos. Nowadays, it is all imaging-related services, from designing, restoring and retouching old pictures to making canvases, mugs, books and other gifts.

At the time, few people were interested in debating whether this was a viable option for independent financial advisers. My guess back then was that the key objection to Snappy Snaps was not the concept itself but the requirement for its employees to wear lime green and yellow uniforms. Somehow, that would have cramped one or two IFAs’ sense of style - for the better, I thought back then.

However, in the wake of Martin Bamford’s intriguing column recently, in which he wondered whether there is scope for IFAs to scale up their business model, I feel mine is an idea that needs to be dusted off and revisited.

First, however, let’s look at why Martin feels scalability is not possible. His own research has led him to the conclusion that “IFA firms can get big, in some cases quickly, but not without sacrificing profit or quality of advice and service.”

When he asked his Twitter audience why, the response seemed to be that while elements of what we all do are scalable, advice is not. “Scaling advice itself, which is typically delivered on a face-to-face basis and relies on individual adviser relationships, is much harder.”

I can understand what Martin is getting at. All of us have individual human qualities that we feel help us relate best with our own clients. There is no one homogenised approach to human contact that will keep everyone happy.

Or is there? I am not so sure. Let’s go back a step - what is it that makes some of the businesses we go to on a regular basis so successful? Here, I am thinking of car dealerships, film outlets, restaurant chains like Prezzo or Pizza Express. Ultimately, it is the fact they offer a near-identical service to their customers the length and breadth of the UK.

How do they achieve that? Martin puts his finger on it, when he talks about “approaches to investment advice and even the production of investment reports”. In other words, the food choice is as standardised as it is possible to be, with the same menu and the same ingredients going into each pizza and pasta dish wherever you go.

The second most important aspect of that homogenisation is the training - everyone who works for one of these national outlets is trained in the same way. They are taught the precise steps in preparing individual dishes and the managers learn the details of how to run that business, how to cope with emergencies, when to make their own decisions and when to refer to head office.

By standardising processes, menus or other services, these national businesses achieve significant savings in scale. Some of these savings are passed back to the customer. The branches and their managers are remunerated on the basis of individual success, as are their staff.

There is an additional factor at play in the case of some of these businesses - they are franchises. In other words, local businesspeople pay good money to run these businesses, in the expectation of extracting even greater profits from them.

They try to ensure they recruit the best people, train and motivate them as much as they can.

An IFA firm could take young people out of college, pay them a decent wage, train them, instil a particular professional vision into them in terms of how to deal with their clients and achieve standards of service while providing them with a career path that includes bonuses or profit-sharing.

If, at the end of three or four years they decide to go elsewhere, fine. At least the new businesses they go to will benefit from that experience and knowledge. With the right backing, a national IFA could be successful and scalable. More to the point, consumers would benefit from a combination of high standardised service and lower costs.

The only minor drawback is that were I running it, I would not want to hire 95 per cent of the current IFA population. Not even if they dress in bright yellow and luminous green.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

  • Print
  • Comments (30)

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Readers' comments (30)

  • As one of the 95% I say thank God

    Unsuitable or offensive? Report this comment

  • I think Nic wrote this article rather late at night, possibly having had a couple of glasses at Pizza Express.

    Unsuitable or offensive? Report this comment

  • Cicutti- Why give this person the time needed to read his anti IFA articles.
    Surely Money Marketing can come up with a journalist that can have an objective view of reality!

    Unsuitable or offensive? Report this comment

  • you obviously have no understanding of how much time and effort and money that this would take,to maybe watch you investment in this person walk out the door to a competitor who could offer a better contract because he has not put in the time,money, the blod sweat and tears that this would need.

    Unsuitable or offensive? Report this comment

  • "An IFA firm could take young people out of college, pay them a decent wage, train them, instil a particular professional vision into them ....If, at the end of three or four years they decide to go elsewhere, fine."

    Easy to see you don't run a business of any kind. Very disappointing Nic.

    Unsuitable or offensive? Report this comment

  • Like we cannot tell the 95% talk is designed to stirr up a reaction.

    I'll settle to be one of the 95% too.

    Unsuitable or offensive? Report this comment

  • Now we appear to have got the abuse out of the way in the first few posts we come back to a fascinating topic. In theory Nic is correct - it should be possible.

    So why has no-one succeeded?? Even the banks with their massive resources have failed to provide a cost effective, nationwide, financial advice service.

    Personally I believe the problem is this: To succeed at something like this you need to take an outsiders view; that is, someone who has never worked in financial services. That person would need a significant amount of financial backing behind them and would need to believe that the financial advice market would provide suitable rewards.

    I suspect that many such people have looked at this and come to the same conclusion that I have (although on a much smaller scale). Until normal English law is applied to financial services and until the regulator is brought under control and made accountable, financial advice firms are pretty much un-ivestable.

    Unsuitable or offensive? Report this comment

  • Those who can't do, preach.
    What a naughty little stirrer you are Nic!

    Unsuitable or offensive? Report this comment

  • I sometimes agree with you Nic but not this time. In the past I have had 24 advisers within my company. Everytime I change something, they leave and they take their clients with them! The Towry debate is relevant here-why develop an adviser just to see them walk of with clients obtained by the hard work of others?

    Whilst I may not wish to employ a certain percentage of the current IFAs practicing, I think that to dismiss 95% is a little harsh!

    Unsuitable or offensive? Report this comment

  • Anyone who dismisses 95% of any group, whether they are Jews, blacks or IFAs has to put into a the group [pillocks]

    Unsuitable or offensive? Report this comment

View results 10 per page | 20 per page | 50 per page

Have your sayEdit my profile/screen name

You must sign in to make a comment

Fund Data

Editor's Pick



Poll

Do you think interest rates will rise before the end of the year?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments