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Focus on your clients

Simon Chamberlain Viewpoint

Customers value planning advice, not product selection

We are just starting to come through the worst reces-sion I have known in my 20 years in financial services. Little over a year ago, many financial planners were wondering what on earth they were going to do with their careers as their clients came knocking at the door demanding to know what was happening to their pensions and other investments as their value fell. But if this period has taught us anything, it is that clients need good financial planners and good financial planners should not pretend to be stockpickers, they should focus entirely on client need.

The retail distribution review, although a rehash of CP121, has come along at an opportune moment. It has given us the impetus to refocus business strategies and re-engage with clients.

CP121 tried to take this route in 2003 and differentiate between the different routes of product sales. Instead of restricted advice, it gave us tied and multi-tied. It rede- fined the IFA as whole of market, remunerated solely by fees paid by the client. Today, by way of the RDR, we may be in a position where IFAs will not be open to any accusation of product or commission bias because they will be charging their client fees.

Often, there is an assumption that if you make a lot of income and capital, it is at the expense of the client. This is not true and I think it is time some people wised up.

Many good IFAs will see the RDR as an opportunity to rethink their business model and focus on being a financial planner – working holistically with clients to evaluate their needs and dreams and preserve and return wealth at key junctures in their client’s life.

We know good clients value proper, long-term objective planning advice – not product or fund selection – and are willing to pay a fee for this. They view their financial planner rather like their accountant or lawyer – professional. Good financial planners can say with pride, their new business model is truly client-focused.

For business owners, changing the business structure from transaction to fee-based may sound onerous and too challenging but they must focus on the end-game.

Before the launch of Succession a few months ago, I was working with a number of small businesses as a non-executive director. I learnt at first hand that successful entrepreneurs demonstrate significant differences between themselves and other businesses. Successful business owners set out not only to give themselves and their staff a salary but also to create a capital event to secure their economic freedom. If I look at most IFA businesses, I would be hard pushed to find a significant percentage that run their businesses along these lines and have developed an exit plan or capitalisation strategy within their overall business plan.

Simon Chamberlain is chief executive of Succession Advisory Service

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