View more on these topics

Independent view

“Oh, so you are an IFA – what do you actually do all day?”

“You shouldn&#39t listen to my secretary&#39s gossip, those three-hour lunches are planning meetings, you know.”

I had started the reflex defence move before realising that, for once, the enquirer was not having a go at me. She was from outside our industry and the ice-breaker cocktail party question “And what do you do, Philip?” had been asked in all innocence. She understood that I was an IFA but that did not tell her what I did.

“Oh,” I said, “I design investment portfolios for executives entering retirement.” “Ah,” she said, “how fascinating” – and immediately moved on to talk to the hunky flying instructor.

This riveting exchange took place some six years ago at a time when we were acting as general practitioner IFAs but were seriously considering specialising exclusively in the retirement market. Our biggest worries were that this move would leave us short of sales leads or missing out on the next big opportunity.

Six years on, we have long made the move and we struggle to control our lead generation. Sometimes we just cannot cope with the demand.

Nor are we alone. I speak regularly to two other chief executives of specialist IFA firms and they have the same problem – an ever-increasing demand for their services. Which leads me to the main themes of this piece – it pays to specialise and independent advice is not a speciality.

The last point may strike you as unfair. It is difficult to be independent and the assistance you can get from outside is severely limited. These statements are undoubtedly true but they do not, in themselves, prove that being independent is special.

After all, even in these difficult days, there are still thousands of firms offering independent advice but failing to distinguish their service from that of their competitors.

Even more surprisingly, there are firms pouring hundreds of millions of pounds of City investors&#39 money into trying to create “the largest IFA in Britain”. As if by simply having thousands of advisers, they will create the demand for their service.

Independent advice was an artificial creation of polarisation, which itself may not survive. So long as it is allowed to exist, independent advice is the best form of financial guidance available in the UK.

Any sensible investor will use an independent to provide the service they want. But what they want, first and foremost, is the service. They want to exercise the open market option on their pension, they want to invest a lump sum or they want to mitigate the eff-ects of inheritance tax. Their real need is a firm that specialises in those areas.

If they wanted a group pension or a mortgage, they would be best dealing with another company, as we do not know those markets. We are independent but we are retirement specialists. And in all modesty, we consider that as retirement advisers we are second to none. Why do we hold such an inflated view? Because it pays to specialise.

The range and sophistication of financial planning in this country has changed out of all recognition in the last 10 years. We have an increasingly sophisticated variety of complex products that need to be exac-tly matched to a client&#39s requirements. All of which is backed by an investigation and compensation system that makes shoddy advice a very, very expensive error.

I truly wonder if any IFA can master every one of our markets and have a full understanding of the intricacies.I would also question if the time consumed by obtaining AFPC passes in all these subjects would be worthwhile.

Why would you want to be a GP when you could master one area and never run out of clients? People know when they have received excellent advice – and they will tell their friends.

People also search for the service they need. When a consumer approaches our industry to find an adviser, specialist marketing is far more effective than general marketing. If you are about to retire, you want retirement advice and so on. You are likely to search for a firm that offers the exact service and respond to the marketing material that contains the correct buzzwords.

We all know that we will have to improve our service in the future to meet the competition of the new mega-companies. If you are not yet a specialist, I strongly advise you to become one.

Philip Rose is a director at Wentworth Rose

Recommended

£700 fee stays despite 60% of complaints thrown out

Mortgage brokers are still being forced to pay £700 to fight allegations of misselling despite the industry&#39s arbitration scheme ruling in their favour in the majority of cases. Brokers are furious after the Mortgage Code Compliance Board confirmed that the non-refundable charge would stand after releasing figures showing that 60 per cent of borrower complaints […]

Change of role for Hogan at Aegon

Aegon Asset Management managing director Russell Hogan is stepping down to pursue other interests outside fund management such as taking a theology degree. He will relinquish control of AAM some time next year but will stay within the Aegon group to follow a more strategic role. A successor will be announced in the next few […]

Paying the price for mediocrity

Further to Peter Hargreaves&#39 letter headlined ICS missed point of Towry Law deal, I would like add that I believe he is correct in his assessment and share his view that the deal is wrong. The liquidation of Advizas was the most likely outcome of the situation for some time during the protracted discussions that […]

Inside Edge

It is just a few more days until responses to the Sandler review are due to be handed in. Some contend that it is just another review but in my opinion that is to deny it its true potential – a meaningful reality check on the state of retail financial services today. Analysis does not […]

Finding security in bond markets

Martin Foden, head of credit research at Royal London Asset Management, explores the role of secured bonds, considering the impact of default and the characteristics of secured bonds versus supranationals and highlighting some examples. He also examines the evolution of the credit market and rating agency inefficiencies. Read the article in full: The value of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment