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IFAs must join brand band

What have fizzy drinks, light bulbs, hamburgers and expensive cars all got in common? They all use branding to sell more of their products at higher prices. This simple fact of commercial life has important implications for IFAs.

A recent survey by brand consultant Inter-brand and JP Morgan concluded that the top three brands in the world are CocaCola, Microsoft and IBM, which are valued at $69.6bn, $64.1bn and $51.2bn respectively.

These businesses routinely spend millions of dollars to ensure that their brands are alive and well in the minds of their target markets. While this makes fascinating reading to marketing degree students, you are probably asking what this has to do with IFAs.

The answer is survival. Without an appreciation of the value of a brand (and what it can do for your business), you are less likely to be around three years from now – particularly when faced with competition from the big brand product distributors offering consumers something that looks and feels like independent advice.

Talk about how not to manage a brand and the IFA industry makes a good case study. Pension misselling, high commission and Coronation Street&#39s “killer IFA” Richard Hillman are just a few of the images that spring to mind when you mention the words financial adviser to your average focus group.

What has gone wrong with the IFA brand and what can IFA firms, with small marketing budgets, do to redress the balance and create a more positive image for themselves?

First, let us consider branding, how it works and why businesses are taking the issue more seriously. In simple terms, brands work by creating a shorthand for businesses to use to stimulate images, feelings or thoughts in the consumers&#39 minds. Coke means youth, fun and good times, BMW means efficient, stylish and highly engineered and Gucci means exclusive, sophisticated and sexy.

By using a constant stream of advertising, public relations, sponsorship and other marketing activities, big companies seek to create a recognisable, high-profile brand personality associated with their name, logo and products.

What, you might ask, has all this got to do with an IFA firm keeping its head above water in the wake of Sandler, CP121 and CP166? A lot, I would say. The marketplace for financial services is changing quickly. The power of the institutions looks set to increase as they seek to maintain profits by gaining more control over their distribution channels.

But the idea that IFAs will be left to become the Tescos or Asda of the financial services sector is fanciful. We might like to think we are well placed to compete head-on with the distributors of 1 per cent products in the post-Sandler world but we need to take a reality check.

Frankly, the reputation of IFAs is at best unclear and, at worst, downright shoddy. The reality is probably somewhere in between the two. Once the industry at large faces up to this problem, it can begin to consider the options.

I do not claim to have a single, simple answer to the problems faced by the IFA sector. It does not take a genius to see a simple fact that seems to have been overlooked so far – in all the talk about standards, Sandler and CP121, the consumer seems to have been left out.

IFAs need to realise that the definition of winners and losers in the industry will be based on the quality of their relationships with clients and to what degree they can add value to the service they provide. This perception of quality will be the central differentiator between success and failure for IFAs in the brand new world of financial services. IFAs need to become more “customer-centric” and concentrate on their relationship with their clients, as opposed to becoming obsessed with the regulators and the changes that their proposals will bring.

Clearly, IFAs will have to work differently to survive in a more crowded, competitive marketplace.

They need to work together to promote the benefits of quality and independent advice to consumers, who will be increasingly confused by the rise of tied and multi-tied agents posing as independent service providers.

Pooling marketing resources to create a national brand for all IFAs will not be easy, as there is a natural reluctance for IFA firms to work together. However, this co-operation is crucial if we are to ensure that we appeal to customers in the future. Together, IFAs must take the high ground. We may not offer off-the-shelf 1 per cent products for almost every investment need, but we will demonstrate our value through clear savings, sound advice, better value investments and the reassurance that we never sell just for the sake of it.

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