“Oh, so you are an IFA – what do you actually do all day?”
“You shouldn't listen to my secretary's 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' 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's 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