When I started my practice six years ago, I had a tough decision to make. I could sit on my backside waiting for hoards of eager clients to knock on my door seeking advice or go out and sell myself.
If I had chosen the former, my career as an IFA would have been short-lived.
There is a shift of opinion in financial services to move from a sales-based approach to an advisory-based stance. We are told we must be professional advisers, not insurance salesmen.
What is wrong with being an insurance salesman? It is not, I suspect, that valuable insurance cover is provided to an underinsured public – it is the salesman tag that carries negative connotations. In the UK, selling is considered unseemly for financial services professionals.
But the distribution of retail financial services will never become an advice-based profession. People do not buy financial services, they must be sold the benefits of having adequate life cover, proper pension funding and the like.
A handful of IFA firms operate very successfully without the need to market themselves or sell their clients their services. However, real life for the smaller IFA is very different. Such firms are invariably run by business people who are highly motivated, hard working and enthusiastic about their business. They go out and sell themselves to potential clients and put themselves up for rejection each time.
Why? Because they want to make money – as much as possible, please. However, who will admit that they are in business to make money for themselves and their family? We are encouraged to operate our businesses for the good of our clients, with no regard to the commercial consequences of adopting this approach.
Look no further than stakeholder pensions – what a great blueprint for destroying the IFA sector. The Government designs an unprofitable product to both pension providers and IFAs and insists that we market this on the Government's behalf.
Oh, and we cannot make any money on this – the client must come first, irrespective of the IFA's commercial position.
We are businessmen and it is lunacy to offer unprofitable products to unprofitable clients. We must put our own commercial interests first. It is possible to operate profitably as an IFA and still offer good advice and service to clients.
A win/win situation must be achieved. If we do not establish the IFA sector on a sound commercial footing, the number of IFAs will rapidly diminish and the public will be left to the banks and the big IFA firms. The result will be impersonal advice from mediocre advisers.
The emphasis should be on providing advice to clients but within the framework of “professional selling”. Selling is not a bad word – the world revolves around it. Professional selling means we use our enthusiasm, interpersonal skills and belief to get our clients to take action on our recommendations – and do this with integrity on a sound commercial basis.
In the drive to become more professional, the value of professional selling is being buried. Those who regard selling as vulgar infuriate me. People will always need to be persuaded to do the things we all know they should. The IFAs who adopt a professional selling stance will find that they will prosper, their actions will ensure that clients are better served and their skills will always be in demand.
Until the Government can persuade the public to insure themselves adequately, build savings and plan for retirement, there will always be a need for the motivated, highly skilled IFA to offer the public a way through the jungle of financial planning to better financial independence.
While civil servants sit in their ivory towers thinking up new ways to ruin our profession, a resilient band of small IFA businesses will continue to serve the public until over-regulation results in these exceptional individuals taking their talents elsewhere.
Carl Melvin is managing director of Millbrae Financial Services