Martin Fox Managing director (marketing), Egg Design and Marketing
As an agency that specialises in financial services, we meet more IFAs in a month than most people do in their lifetime. We work for some IFAs, product providers which distribute their products via IFAs and for trade associations. We also conduct research among IFAs.
Of course, there is no substitute for being an IFA if you really want to know about the IFA market today but I guess our daily contact with IFAs gives us some credibility in writing this article.
There has been much deb ate and many column inches devoted to the role of independent advisers and whether the polarisation rules should be changed.
Change may still happen although I think there is a softening of attitudes and the status quo might be left alone for a while longer.
But one has to ask why the IFA position is under threat at all. They can offer so much more than the tied adviser. I suspect IFAs have themselves to blame for not cap italising on their advantages. So, what are the advantages? The following is not meant to be exhaustive but it does make the point. IFAs can offer clients a wider choice of product prov ider products and risk profiles and far greater switching facilities between products and providers.
So, what does this mean in practice? No one product pro vider can, or does, offer all the products that a client might want. If a client goes to see a tied adviser of a high-street company (be it bank or building society), they are unlikely to be offered investment trusts, health or private medical cover, open market options or venture capital trusts.
Yet investment trusts offer a far wider spread of investment profile than unit trusts, both more secure and more risky. Health cover may be just what a client needs. Open market options can enhance the lifestyle in retirement. Venture capital trusts could suit the risk and tax profile of the client and these are just a few examples.
So, all the arguments are stacked in favour of IFAs. If this is the case, then one has to wonder why there is still an argument about their role and status. Perhaps it is because IFAs have been forced by regulation to concentrate on compliance, competence and training rather than on communications and putting clients first.
Research shows IFAs see a far greater need to be “safe” from the regulator than to provide a superior service to their clients. Is this what regulation means? A challenge perhaps for the regulators.
Moving on, what can IFAs do in practical terms to build a brand that clearly differentiates them from other players, particularly tied advisers, in the market? Here are some practical suggestions:
A differentiated product offering
It is up to IFAs to ensure they are comfortable and conversant with the widest possible range of products. In our work for the AITC on IFA communications for the “its” campaign, we have talked to scores of IFAs. It is hugely encouraging to see how many IFAs turn out each month to attend the AITC IFA forums. It is equally encouraging to see these IFAs are looking to expand their knowledge and develop their investment business.
It is alarming to hear IFAs say their clients find investment trusts confusing when what they really mean (on further questioning) is that they themselves find investment trusts confusing.
In fact, the education material now available from the AITC means no IFA need ever feel confused again.If an IFA wants to be different, then they need to ensure they are up to date on the full range of products available to them and for their clients.
A different service offering
From our own experience, there are two types of IFA – those that sell products and those that offer a regular ongoing financial planning service to their clients.
Those that offer the latter offer something that many people want. Research has shown that, positioned correctly, this is a highly attractive offering to potentially millions of clients. Most people would value independent advice from people they can trust.
Use your client base
For any company, the existing client base is probably your most valuable tool. For an IFA, this is certainly the case.
The fact-find process followed by the right advice is designed to build a relationship. The right relationship, properly valued, will lead to both repeat business and the opportunity for recommend
ation and referral. If you are offering the right service, you should expect recommendations and not be afraid of asking for referrals. Also, target the clients that are likely to offer you the greatest return and dividends.
Use the support of the product providers
A number of product providers offer very good marketing support material to IFAs. Mat erial and ideas that can help open up new markets. Latch on to the material that is good. You can pick and choose. This choice gives you an advantage over a tied adviser, who is stuck with the support material of just one company.
Workshops we have run with IFAs have revealed a number of attitudes. What is encouraging is that there is less fear of the internet. There are many examples:
Product providers can help – they want to work with you.
Online information for you and your clients.
Holistic client management.
In today's world, it does not take a great deal to come across as an expert because the information exists to support you. In summary, use your independence, use the support of the product providers, offer more to your clients and put them first. If you can succeed in this, the arguments about the role of IFAs will no longer exist.