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Financial planning is not just a marketing label


For many, the RDR seems to have led to a minimal change in approach, with execution through investments or other product purchase still determining some levels of remuneration.

We at The Ideas Lab have long held the view that bundled charging does not have a particularly lasting shelf life. 

To us, the value of the process is best achieved through a modular charging structure instead of the common approach of sweeping it under a single base charge applied to your clients’ investment portfolio.

As this continues, we find ourselves in a marketplace where the use of the term “planning” is increasing exponentially. 

However, that many see this as a label rather than a proper process. Indeed it is
exactly that process that is intended to deliver financial independence, in turn creating substantial value and leading to relationships with clients becoming all the more sticky.

Marketing or process?

Post-RDR financial planning for many advisers is simply being used as a marketing term, as opposed to something that helps people plan.

This is not solely a British problem, there are many in the US who call themselves financial planners when they are more accurately investment advisers.

Some time ago, I helped a financial planning software company produce a report that determined exactly when and where people put together subsequently revised financial plans. We looked into more than 200 firms and, as suspected, in only 10 per cent of cases were the original plans ever revisited. 

It may well be the advisers concerned were very good at assumptions or perhaps they each had their own crystal ball but the reality is that the “planning” was being used as a means to sell investments and not really as an integral part of the service. 

Taking that approach, of using financial planning as a sales catalyst, is dangerous.  This approach fails to communicate just how difficult it is to create a robust plan that delivers optimum advantage for clients in all aspects of their financial interests. 

Making sure you have a robust proposition is one of the things we have stressed; it is extremely important if you are to have a successful business.

Without this robust proposition, what you are offering becomes somewhat fragile and any movements that happen in the marketplace are going to be magnified to a significant extent. 

As well making sure the proposition is robust, we have to start looking more and more at how much the different elements of the proposition cost; what can be automated, what can be omitted and what can be done more cheaply. 

This might mean searching in different geographical locations to locate staff when the objective is to deliver excellent service but at an acceptable cost. There will not be the margin to “cushion guesses” any more and that point needs to be recognised by all parties.

Break down your time

This is the ideal time to sit down in the quiet of the summer and look at fixed costs and determine what is really necessary.  This inevitably leads you towards some form of time measurement process, something which many people try to avoid but is actually the one thing that should be tackled as a matter of priority. Unless you know the time it takes to do something, it makes it very difficult to calculate how you are going to determine its cost.

The squeeze is on and this will lead to the hunt for savings. If we have a market downturn, that hunt may well go into overdrive – so know where you can make maximum savings in your own businesses without compromising on quality.

Robert Reid is a director at The Ideas Lab



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Rob
    On the button. I have always been content with the IFA title. Less scope for obfuscation. I’m independent and I advise on financial matters. For me that covers it – without the precious titles and self-aggrandising sobriquets.

  2. I agree wholeheartedly. I find that people use the term `planner’ to describe themselves because they think it sets them from the crowd. In reality, it creates a problem beacuse they cannot/do not deliver on expectations. I am paid for my plan whether a `product’ is sold or not – it is the expertise along with the ongoing relationship for which clients are willing to pay. To keep costs down, it is important to break the job down, identify which parts are chargeable and then cost each part of it.

  3. Phil Billingham 25th July 2014 at 2:47 pm

    Good afternoon gentlemen,

    With respect, can I suggest the assumptions in the comments above bear out Roberts point. Calling yourself a Financial Planner is not about grand titles, but should be about a label attached to a particular business model / client process.

    I think the point being made is that some – many – who use the title, do not, in reality, carry out the tasks of Financial Planning. They may well be doing a very good job of being an IFA or Wealth Manager, or Investment Adviser or whatever.

    This is – or should be – not about being better or worse than anyone, but ‘doing what it says on the tin’. Clarity is important here.

    I call myself a Financial Planner. That’s because I have both passed an assessment to say I can do the task, and passed an assessment to say that, as a firm, we actually do what we say. That seems fair to me.

    It’s not the right model for all firms or all clients. But there should be transparency so potential clients can judge what service they want

  4. Phil

    I too have passed the assessment. I also plan (amongst other things), but I think the title IFA is a lot less ambiguous and is well understood by the general public. (At least the public that I deal with).

    I also suspect that the rash of proliferating titles is to some degree as a result of some people being ashamed or embarrassed with the IFA title – or perhaps they don’t qualify for the ‘Independent’ label and seek to find other sobriquets other than ‘Restricted’.

  5. All fair comments but look at it from the client’s perspective (remember them?). How many clients could tell you the difference, and understand how that relates to their needs, between an IFA and a Financial Planner, wealth manager, Investment Gnu or any of the other titles?

    IFA used to say it with the greatest clarity until the FSA/FCA buggered about with what it meant with RDR. Now nobody understands what it means, including the FCA who can’t interpret their own rules on the subject. Sigh. Clients. Sigh.

  6. Phil Billingham 30th July 2014 at 5:22 am

    Hi Harry and Grey Area,

    Overall I agree. IFA was a great badge. One I still wear with pride. But Planner is a better descriptor of our business

    Yes, proliferation of titles confuses Clients. Especially when smoke and mirrors. Like Tied agents from banks with barely a level 4 being called Planners and so on. but lets not go there…

    Have a great weekend all

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