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Cicutti: No reason IFAs can’t build up scale

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


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There are 30 comments at the moment, we would love to hear your opinion too.

  1. As one of the 95% I say thank God

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

  3. 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!

  4. 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.

  5. “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.

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

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

  7. 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.

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

  9. 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!

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

  11. Go and write nonsense about a profession that you like then Nic, maybe one you know something about?

  12. @David Salmon

    Sorry – you’re wrong…the saying is…

    Those that can do
    Those that can’t, teach
    Those that can’t teach, teach PE
    Those that can’t teach PE, write columns for Money Marketing.

  13. Moderator

    I see that you no longer publish anything from me. No idea why but goodbye

  14. Nic, I regularly use your rantings to show my son and his university friends exactly why they should not consider FS as a career.
    Seriously MM why do you continue to pay money for this rubbish?

  15. Nic I cant understand why you are given space in the MM…do you work for the FSA as a secret agent?

  16. Martin’s aricle came about because this is one of the challenges that we decided to face up to in our business. Having created systems and processes, recruited the right people and started to develop a local brand we then pondered on the prospects for growing the business.

    @ Ken Hayden has “hit a nail on the head” the real challenge is people. Many want to do it their way or not at all and a systems or process change which is in the interest of the client, firm and those same individuals, is often taken as a signal that their way isnt good enough- so they leave.

    @ Soren Lorenson. Good point and interestingly a private equity investor we have spoken to in the last week or so who has absolutely no financial services experience at all believes exactly your point. He thinks the intermediary market turmoil bought about by the RDR changes is going to create a chance for “super profits” (his words) for the IFA firm that gets the client service proposition right.

    Finally when you consider that the top 100 IFA firms by turnover range from £448m down to £2.8m and that most of the bigger firms are networks or indeed Wealth Management (DFM/Stockbroker) firms rather than individual IFA firms it shows that the IFA community in the main remains a “cottage industry”

  17. Nic, why not join up with the Bamfords and give your idea a go. You would make a great team.

  18. To be provocative is one thing and if constructive perfectly acceptable. To be gratuitously rude is neither constructive nor acceptable. As my grandmother told me, rudeness is a sign of a poor upbringing and displays a profound ignorance. Seems to characterise NC’s last contribution exactly

  19. Years ago, we had many very successful franchises such as you speak of Nick. Most of them were called ‘tied sales forces’ where each trader (or adviser or sales consultant) was self employed. For those of us that started that way our fee to buy into the franchise was the cost of the year or so of little or no earnings whilst we found the initial ‘clients’ to sell something to. In fact the franchisor that I started with provided blank business cards for the first six months such was the attrition rate!

    The demise of these was not due to the business model, it was due to regulation and the cost of supervising large numbers whilst at the same time motivating them to sell. No service orientated firm will possibly be able to sucessfully replicate their model broadly, it just cannot work.

    Snappy Snaps franchises, just like the Pizza Hut or Prontaprint ones, may all look the same on the outside but under the surface they most certainly are not; as long as the glossy image appears the same, each manager has freedom in what he does to make it a success of it. I bet that if these ‘sales’ outlets were regulated to the same extent that we are, they would be closing left right and centre.

    No Nic, I am afraid that I do agree with Martin that the service based model cannot be rolled out nationally ………..Would you like to go large on that?

  20. Obviously got too much time on his hands.

  21. Thank god I too am one of the 95% Nic.

    You are a funny old chap you really are !!

  22. Mark H (Not Hoban!) 16th February 2012 at 4:15 pm

    NC – I thought that you had been around our business for many years. If you have you obviously haven’t been taking too much in! The model was used for many years by the ‘Home Service’ part of our industry and was, I believe, quite successful and profitably for them. This model however changed massively due to the extreme costs of regulation where you saw many successful brands such as Pru, Pearl, Co-op etc, etc, etc, pull out of the ‘national’ market of sales teams. Why would anybody want to try that route now with the way costs are so top heavy in business. I guess if you were a billionaire and you had a strong desire to become a millionaire then hey, go for it!
    By the way NC, as for your issues with the 95%, I am so glad that I consider myself to be one of them!

  23. My comment is nothing I wanted to make it known that in my opinion this pathetic article is not worthy of comment.

  24. The usual rabble rousing and the usual rabble response. The reason the IFA market is not scalable? When IFA firms grow the whole back office/compliance function ends up costing a fortune, so the IFA has to become a ‘flog it and churn’ merchant…. which eventually comes crashing down around the mugs from whatever Life Co owns it at the time!

  25. It seems a very strange analogy to link IFAs with pizza outlets etc. Surely Mr Cicutti should be looking at similar professions, such as lawyers, architects and accountants? If one does this, you will notice they have a similar shape to the IFA profession – many, many small firms, and a few large ones, all servicing particular segments of their market.

    As the IFA job evolves more towards a recognisable profession, I would expect it to continue to look more like those sectors, not a photo-shop chain or the like.

  26. @Nic

    1.“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.

    =>Works if it’s similar to a Paraplanner role

    2. “If, at the end of three or four years they decide to go elsewhere, fine…”

    => After paying about £75k + in costs, is it fine that they leave? Spoken like an experienced business owner then?!

    3. “With the right backing, a national IFA could be successful and scalable…”

    => Been tried many times… and ever thought WHY it has always failed?

    4. “ More to the point, consumers would benefit from a combination of high standardised service and lower costs”

    => Like a bank by any chance?

    Nic, experienced IFAs and business innovators understand the mechanics of an IFA practice. That’s why scalability (and its effects) is confirmed by the Bamfords and their research. It won’t work on a big scale. To think it will simply shows your inexperience and lack of insight into an IFA business, on this occasion. Theory is all well and good, but the fact is that it has been tried, tested and failed.

  27. “With the right backing a national IFA could be successful and scalable”
    Why not get some of your wealthy colleagues involved Nic? The workforce could be supplied with mobile phones to get them started.
    On second thoughts 95% of the population would not apply. As for the remaining 5% they would have no problem.

  28. Why oh why do we always give NIc the pleasure of biting every time he casts his fly? Can’t we see that it is just the reaction he is seeking?

    The scaleability topic is a very interesting one which I have pondered many times in the 30 years that I have been an IFA. Whether I am in the 95% or Nic’s 5% matters not a jot to me. Who wants to be in his team anyway?

  29. Peter Davies @ Create Wealth 20th February 2012 at 2:45 pm

    Nic you remind of Dereck Chisora – battling away, getting PR, but becoming unliked!

    Understand what you’re saying about the 95%. In any industry the top 5% is usually of a high quality. From a recent recruitment drive I would say that the standards of advisers and support staff hasn’t impressed me either!

  30. The banks have all the scaleability Nic could wish upon a regulated firm, look at how lousy that distribution model can be.

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