“If you don't know where you are going, all roads lead there.” So said the Cheshire cat in Alice in Wonderland.
At the start of each year, I force myself to carry out a business exercise that has proved to be invaluable while trying to run an IFA firm – a written analysis of where our business is and where we want to get to.
Although you might think that you would probably prefer to attack your dangly bits with a rusty knife than go through such a tedious process, the results never fail to surprise and enlighten.
For those without their own business, it works really well for individuals, too. Perhaps it will be the exercise that will lead you to start your own business – in which case I apologise in advance for all the heartache ahead.
Having been taught joined-up writing at the Junior Army Staff College, I use a process grandly called a “military appreciation”. Unusually for the armed forces, this is very obvious and straightforward. You simply go through a four-stage analysis – one, decide your business aims (which needs some thought); two, write down the factors affecting your aims (for example, we have no money in the bank); three, decide the different courses open to you (be bold but practical); four, decide your chosen course.
As with so many things in life, the main benefit is not the final answer (readers of the Hitchhiker's Guide to the Galaxy will know that the answer to the meaning of life is 42) but the thinking needed to get there. When did you last truly consider exactly what you are trying to achieve in business and in what direction you should steer? Normally, we are just happy to stay afloat and weather the storms.
Over the last 12 years, our different analyses have led us to triple our marketing effort, to specialise exclusively in retirement work and to look for a famous brand affinity partner, among other changes. All these steps were ones that we were unlikely to have taken if we had just been managing day by day. You have to step back and survey the scenery.
Being Stalinistic by temperament, we now work to a five-year strategic plan and a one-year tactical plan. But unless you are another control freak, this may be unnecessarily complicated.
So what are likely to be the main courses open to Wentworth Rose as we line up to face 2002 and what do we see as the biggest challenges facing IFAs at present?
The number-one challenge this year is likely to be recruitment. We are planning to continue our expansion and are looking to find the highest quality advisers in the retirement field.
The creation of mega-IFAs, looking to build to many hundreds or even thousands of advisers, is doing to the IFA market what the Common Fishing Policy is doing the North Sea – emptying it. Hopefully, the highest quality people will still be attracted to the companies dealing with the top end of the market, something the megas cannot achieve by definition.
The second big issue for IFA firms, big and small, will be controlling costs. At the simple end of this equation is the ever rising cost of recruitment, compliance and T&C. At the pointed (and perhaps barbed) end is the Sandler report with its unknown consequences for remuneration.
On the costs side, IFAs as a group simply must cut the costs of administration. After years of false starts, we still do not have proper online transaction facilities with the product providers. How can we have managed to enter the 21st Century still keying commission receipts manually? If Sandler should move more of the remuneration to trail commission, how will we ever cope? Most IFAs do not even log trail.
The product providers have now accepted that joint action may be a long time coming and have put considerable resources into providing useable websites on an individual basis. Although this may be a poor second to a true common platform, the facilities do work. We IFAs really must start to support and encourage these developments. Just work out how much of your administrative overhead is spent on keying information and producing valuations – the result is frightening.
As a final note, I must just comment on the fact that we seem to be making our plans in a flawed environment. We cannot be sure of the factors affecting our aim at this time, as we do not know the shape of the regulation of our industry in the immediate future.
Speaking personally, I do not really mind if we have multi-ties or not, what I do object to is the uncertainty.
An appreciation of the IFA world at the moment relies on guesswork and intuition rather than facts. Once again, the Junior Army Staff College would have failed my paper.
Philip Rose is managing director at Wentworth Rose