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 firstname.lastname@example.org