IFP’s view

I am about to embark on four weeks of roadshows with Clerical Medical to talk on the depolarised market and the opportunities for advisers over the next few years.

Looking at research conducted by Clerical, it is worrying to see a negative trend that suggests around 25 per cent of the market are not intending to make any change to their business or see no point in doing so. Equally worrying is research that shows most advisers are prepared to put up with unprofitable clients. This philosophy has to change to ensure survival.

Too often in the past, surveys have regarded company success in terms of assets under management or commission turnover. It is interesting to note that a number of these companies are no longer around, perhaps suggesting there was little quality attached to these businesses.

The opportunity moving forward is to build an exceptional business, irrespective of what it might be called in a depolarised world. Research by Advisor Impact concludes that an exceptional practice is one that is profitable today, continues to grow, operates efficiently and has loyal clients. The challenge for many IFA practices is to define or redefine their business model to prepare for the opportunities that lie ahead.

The challenge of the menu is to determine a company’s proposition and then articulate it to clients. It is no surprise to the IFP that the number of certified financial planner professionals has increased by 33 per cent over the last 12 months. Leading firms and individual advisers have recognised that they need to differentiate themselves and add more value to their proposition and client relationship. In many cases, this has led to more fee-based financial planners and a new business model emerging that is going to capture a sizeable part of the mass-affluent market in the next few years.

Looking at the demographics should prove incentive to take up the challenge. The baby boomer generation includes those born between 1946 and 1964, who are now squarely in their earning years. This should lead to increased savings, more investable assets and better times for the advice business.

Projecting forward 10 to15 years, when the baby boomers will be between 50 and the late 60s, there will be a large volume of assets being realised through retirement pots or the proceeds from business sales and downsizing homes. These individuals need fee-based comprehensive planning now to help organise and prepare them for the 10 to 15 years ahead. Effective strategies need to be defined, along with proper focus on goals and objectives. Depolarised markets allow businesses to start filling the space previously occupied by private banks and mediocre IFA firms. Value will be defined in the planning proposition and others will continue to sell products and provide regulated solutions to specific needs.

The IFA has a choice to make in reshaping and focusing on the advice market or making do with transaction-based selling. Over the next few weeks, we will be able to share some tools with over 2,000 IFAs to help them evaluate their businesses and start shaping them in such a way that they will understand the challenges and then be able to participate in the opportunity and rewards that depolarisation offers.

Nick Cann is chief executive of the Institute of Financial Planning

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