The UK’s financial adviser community is smart and resilient but it is also prone to falling in love with fads and trends (technology, with-profit bonds, low-cost endowments). A welcome part of the cultural revolution called the RDR is a shift of emphasis from products to service. But for some people, it looks as if the concept of service has turned into the next hot thing, which means it is being overcooked.
I recently spoke to an IFA who told me he had six different service propositions. I must have looked a bit surprised because he proceeded to justify the very slight differences in what his firm offered to different people under six different descriptions. And there are a good few IFA firms whose websites show they have embraced the tired old “silver, gold, platinum” branding of service levels.
There is always a trend to convert services into products, not just in financial services but everywhere. It happens because we are lazy.
The more you can define and limit a service, the more it looks like a product and that makes it easier for salespeople and prospects to get their heads around. But that does not mean it is necessarily better for either the adviser or the client. In fact, over-specification of services is likely to trip up many advisers on their way to the new model paradise.
The problem with highly defined services is that you have to manage them in line with what you have promised and the more specific you are, the more difficult it is to change things. Significant changes mean you will probably have to issue a new client agreement and drawing clients’ attention to what they are paying after you have signed them up is not generally regarded as a brilliant business strategy.
If you keep the old service going and add a new one, you compound the management problem. Are your CRM, MI systems and staff up to running lots of different services? Probably not. Inevitably, you will fail to deliver what you have promised to some group of clients.
Of course, most of them will never notice but it only takes one because TCF will require you to make amends to all those affected, not just the one who complains.
Highly specified services can be just another way of designing boxes into which to cram your clients. And it panders to the laziness of advisers who just want to attach form A, B or C to their recommendations. I believe it is better to think in terms of what clients want and need and to have a menu of things they can choose. That need not be too hard to administer.
Crucially, if you adopt a menu approach, it forces advisers to ask in detail about what clients want and need rather than trying to sell something which – inevitably – will not suit everyone.
If the client feels they do not want or need half of what is in your package, they may conclude that they are paying too much, whereas if you only offer what they actually want, they may be happy to pay as much as they would have paid for all the platinum in your portmanteau.
If you have got this far, you may also have got the point about selling a service being completely different from selling a product and be a step closer to that new model paradise.
Chris Gilchrist is the joint author of The Process of Financial Planning and editor of The IRS Report