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All the world&#39s a life stage

I read in Money Marketing (yes, I read it as well) that there is a possibility that IFAs could be encouraged to specialise in particular areas of business. Apparently, the FSA has put forward the idea that advisers could choose to specialise in particular areas, leading consumers to identify certain advisers with stages in their lives.

Much debate will no doubt take place on the rightness of any possible attempt to force advisers to specialise by reference to life stages. I am not going to comment on that. However, regardless of what, if anything, may emerge regarding adviser categorisation, it is my view that building propositions for financial planning by reference to life stages has nothing inherently wrong with it. An approach such as this gives rise to the possibility of securing scale on the investment of time made by a business or individual in building solutions.

The topic of mass customisation in financial services is one I have touched on before. Its application is founded on the fact that the financial needs and circumstances of many can be categorised so that some identifiable groups can be clearly ascertained. Once this has been done, then solutions and strategies appropriate to the group can be developed in the knowledge that there is a sufficiently wide market for what is being developed. This is a very comforting thought when making any significant investment.

Everyone would love a bespoke solution truly crafted just for them, so to speak. But just as everyone cannot afford a Savile Row suit, not everyone can afford bespoke advice, however it is charged for. Some businesses may try to give it but if the proper rate is not charged in one way or another, the business model will collapse as costs will exceed revenue – unless there is another part of the business that is profitable and, in effect, funds this non-profitable part.

Just as with a reasonably wide range of made-to-measure suits with a combination of different chest sizes, trouser lengths, styles and waist sizes, it is possible, through mass customisation, to deliver a range of solutions that fit the particular individual well and secure the benefit of scaleability. It is not exactly the same but, for the quality and the price, the consumer feels reasonably well served. There is nothing wrong with customer satisfaction if your aim is building loyalty, trust and a relationship.

The importance of scaleability cannot, therefore, be underestimated if, as a result, appropriate solutions can be delivered at a lower cost to a wide market. That seems to me to be worth aiming for. It can work with financial services as well as within the clothing industry.

The life-stage approach to building mass-customised solutions is one that Technical Connection has used in working with some of our key product provider and IFA clients to build a range of tax planning solutions and strategies directly and indirectly connected with financial services.

We and our clients have found that this can easily support a clear checklist approach to planning for particular client types that can both avoid over-complication and the risk of missing something.

Of course, some of the things on the tax planning checklist would appear to be no-brainers. However, to assume that everybody in the life stage has carried out what would appear to be basic planning just because it seems obvious to the adviser is just as brainless in our opinion.

For example, in the parental life stage, have all parties thought about how to maximise use of their children&#39s tax allowances and exemptions (income tax and capital gains tax) legitimately to minimise tax and maximise savings? Probably not is the answer.

In the working life stage, has everyone who runs their own business reviewed remuneration policy – especially in the light of recent National Insurance changes – to ensure that maximum benefits are being extracted with minimal tax leakage? Again, probably not. The value of even checking that this is so should not be underestimated.

Provided that the approach is directed at clients who are likely to value a thorough and thoughtful approach to planning, the minimum payback on the investment of time made will be the appreciation of attention to detail and care for the client that will have been demonstrated.

We have seen this on a number of occasions when looking at the potential protection needs of those in the working life stage who run their own business – either the liability audit (looking at financial business risk) or the 100 per cent business property relief check (looking at the appropriateness of business succession planning).

In both cases, even if (rarely) the business is sorted (showing my roots again) financially, legally and tax-effectively, valuable appreciation for the time taken is earned and the relationship with the business client (with a potentially wide range of personal and financial business needs) is improved. It is simple but it is not easy.

Mass customisation can also be taken to the next level. Our experience has shown that for each life stage there is the possibility to sub-divide the client category so as to target the solutions and strategies more accurately, thus moving close to an apparently bespoke solution but while still staying within the important commercial boundaries of mass customisation, that is, ensuring that through the scaleability of solutions and size of market, a decent return on investment is secured.


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