There is an old Chinese saying: “Let us live in interesting times”. Well,
life as an IFA these days is certainly interesting.
What with the pension review, the FSAVC review and endowments debate, life
as an IFA just seems to keep on getting more and more challenging. Many of
the traditional products that used to be sold can no longer be justified
and there is increasing pressure to reduce commission.
Unless you have a big IFA practice, it is practically impossible to be a
general practitioner and offer the full range and give truly good financial
advice. The key is to specialise.
Concentrate on your core area and refer other work to specialists,
including other IFAs. Does it sound crazy referring work to other IFAs?
Well, it need not be. Let me explain why.
A number of years ago, I met an adviser who was really much more of a
facilitator than anything else. He was not registered under the Financial
Services Act as an IFA, nor was he an accountant or solicitor. Yet he had a
number of very weal-thy expatriate clients and worked on a fees-only basis
putting together good advice for them by working his network of advisers.
His fees were quite high because he was seen to be a specialist.
Ever since then I have inc-reasingly run our businesses along these lines.
Our core businesses are in accountancy and financial services. Our
specialism is lump-sum taxefficient investments (including pensions) for
high-net-worth individuals who are typically age 55-plus and preferably the
owners of growing businesses in a specialist or niche field themselves.
While we are authorised to arrange mortgages, life and health insurances,
we increasingly refer these enquiries to mortgage brokers, general
insurance brokers and other IFAs. Our aim is to do nothing but lump-sum
investments and pensions after the next 18 months by gradually stopping
other classes of business.
Our investment business is usually conducted with a panel of stockbrokers
or multi-fund managers. Pension business includes drawdown, phased
retirement, pension transfers, executive pensions, SSASs and selected group
stakeholder or group personal pension schemes (basically, large schemes
A specialism we particularly like is pensions and divorce. We are members
of the Div-orce Corporation and provide actuarially produced reports on
pensions on divorce for solicitors' clients. This is a good way of opening
doors to matrimonial lawyers. We are inc-reasingly finding that solicitors
are approaching us as the local experts. Now that is an interesting twist.
So far, we have found that all the cases referred to us by solicitors
involve big estates, typically £500,000 upwards. Two main types of
business result – investments and pension transfers.
We firmly believe in lumpsum investment business for the following reasons:
Investment business rem-oves commission clawbacks.
It generates fund-based renewal commission each year (an appreciating
asset of your business).
We enjoy the working relationship we have with more mature investors.
Investment business is usually much less hurried than, for example,
mortgages or insurances, which normally have tighter deadlines.
You are paid for servicing the client by the renewal commission.
You are guaranteed to be paid for your work once the client has agreed to
proceed, unlike mortgages and insurances, which depend on the mortgage
completing and the insurance being accepted and going on risk.
It is generally less timeconsuming to conduct the business.
It is probably the easiest area to justify fees.
It is the least likely area to be threatened by misselling reviews.
Prospects are highly promising as more and more people are coming into
money these days.
This last point is highly relevant. There is a wall of money waiting to be
invested over the next 10 years and beyond due to the baby boomers after
the Second World War. These people are now 55-plus – the classic time when
they start to come into money from inheritances, redundancies, pension lump
sums, endowment maturities, etc.
Tony Byrne is business development director for Byrne Williams Independent
Financial Advisers & Investment Specialists