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Chris Davies: What’s your financial advice strategy?

First assess your firm’s objectives, allocate resources then steer for well-planned business success


Advisers and financial planners face tough decisions when managing the future direction their businesses should take. The market, which the RDR has helped shape, is demanding a firm understanding for holistic business strategy; a focus for corporate governance based on prudent business practice that incorporates ethics, clients’ best interests and all round duty of care.

In essence, the days of being just product distributors, and being regulated as such, are gone. Professionalism now means walking the talk of best practice.

1. What are the objectives of the firm and what needs to happen to ensure you hit them?

The objectives are like the architecture for the business and provide the overarching blueprint to which strategic planning can be assessed. 

There are some good examples for firms making strategic decisions that have reaped rewards:

  • Outsourcing versus insourcing: We have found once adviser firms realise they just cannot do everything, and once they have streamlined and segmented their business practices and services, the decision to find suitable third parties to provide a quality service becomes easier. The trick is to ensure a robust due diligence process is in place to choose the right internal or external solution.
  • Specialist versus generalist: There is still plenty of debate around independence versus restricted advice. Those who have carefully forged a niche have gained the status of a ‘go to’ business in that market. Either way, the firm needs to ensure they are 100 per cent clear on the services offered and most importantly that clients realise this.
  • Firm value: Advice firms that realise traditional accounting practice only counts revenue received rather than the cost of servicing clients will be the ones who build value. Firms that can demonstrate the “strategic lifetime value” of their clients, that is, the net present value of future expected cashflows (income minus cost of service) and factor in the value of client retention and loyalty will build robust models that are attractive and heavily influence the amount the owner(s) will receive on sale. 

2. When will agreed actions and activities take place? What resources will be used and who is responsible for them?

Action plans are one of the essential components for strategic planning. This identifies the tasks in hand, allocates responsibilities and timelines to increase accountability and involves corporate governance and ethics in the follow-through of the strategic plan.

3. How will success be measured? What metrics are important and how will you track them?

Dr Robert Kaplan and David Norton developed the balanced scorecard, a strategy management tool that not only will align business and strategic planning with stakeholder needs, but also will bring a more holistic measure to the planning process that the regulator desires. A balanced scorecard allows the business to align strategic planning with the vision, philosophy and existing operations of the business and ensure action takes place and is measured.

An example of how this works is set out in the diagram below.

Strategic planning will ensure advisers become savvier in creating value for the business, client-centric propositions and a happier regulator.

MM 040914 Graphic p41

Chris Davies is managing director at Engage Insight


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