Whatever shape the eventual changes to our industry take in the wake of the FSA's polarisation review, what is inevitable is that our world as we know it is going to change. Any sensible business entrepreneur must exercise leadership in charting a course through the uncertain waters ahead.
We can no longer simply manage our businesses, we must now accept the challenge of defining our future strategies and informing our staff, colleagues and clients of what we are planning and why.
Michael Gerber, in his book The Emyth, asks business leaders whether they are working in their business or on their business? I believe the answer to this will determine whether or not an IFA practice will survive. Those IFA principals content to get by each day repeating the same procedures and not embracing the challenges of change will fail. What is the definition of true insanity? Repeating the same thing time and time again, yet expecting a different result.
This is the danger that lurks for any IFA business that does not seriously review its strategy in terms of the new independent or distributor status positions as announced in the CP121 proposals.
Whether you are choosing to remain independent or moving to an authorised or multi-tied position, or a combination of roles within a single practice, what must change is the way that business is organised and conducted – otherwise failure looms.
I believe the issue is not simply deciding whether to remain an independent financial adviser or to adopt some other status, it is making certain that a profitable future is more than a pipedream.
This is our daily challenge – to meet the bottom line, pay the bills and develop successful business strategies for the future. The IFA principal not only has the challenge of running the business and all the issues involved in providing technical and regulated financial advice but must now take on the additional responsibility of planning a profitable future in uncertain times ahead.
It is here that the Fee Based Advice Foundation can provide significant support to IFAs in making their transformation. This is the first time that IFAs have established a service and support organisation for fellow IFAs. Who better to coach IFAs towards a profitable future than other IFAs that are a little bit further along the track of experience? We can no longer rely on anybody else to help us.
The major product providers are interested in controlling the channels of distribution of financial products here in the UK and will focus their energy and support almost exclusively on building multi-tied distribution.
IFAs will be left to fend for themselves and those who want to continue taking remuneration on a commission basis under the proposed authorised status may well find that the 1 per cent world will soon encroach upon other areas of business besides stakeholder pensions.
Remaining independent and moving from commission to a fee basis appears a formidable challenge to IFAs who have been largely commission-based. I have started making the transformation by moving towards a fee basis in my practice over the past three years. The amazing thing is that clients will pay fees if you select the right clients and are confident of the professional level of services you provide. It does mean that you must change the way you do business.
I have learnt that it takes a complete root and branch change to the way you do business if you are going to be successful as a fee-based IFA. The focus must change and you need the support of a world-class practice manager and paraplanner. The fee-based adviser must concentrate on relationships and developing new referrals from those relationships. The fee-based IFA cannot be involved in the daily clutter of activities.
The focus must be entirely on the smaller number of clients who are paying fees and not on anything else.
We have a coaching programme already in place – The Six Strategies for Success – which runs over 12 months to include IFA principals and their practice managers. It is essential to coach the practice managers in the same way as their principals if the teamwork necessary for success is to be achieved.
The Six Strategies for Success will apply to any IFA firm accepting that they must change the way they do business in a depolarised world.
The first strategy is to take complete financial control of your future and make certain it is profitable. Strategy two involves the techniques of building a world-class support team. The third strategy focuses on creating a perfect workplace before the programme moves to the skills of selling fee-based advice, building marketing engines and, most important, taking care of yourself.
As an fee-based IFA entrepreneur, you are the most important person in your business.
The Fee Based Advice Foundation will embrace the skills of many of the UK's top IFAs. We will all learn from each other. The skills and efforts of the foundation coaching team will assist our members in making the transformation, achieving a profitable future and expanding their businesses into areas they are not currently exploiting, such as working with professionals, pensions and divorce.
By working together and contributing our collective skills and experiences, we stand the best possible chance of driving our businesses forward towards a profitable future.
The Fee Based Advice Foundation can be contacted at www.feebased advice.co.uk/foundation.