The jury is still out over the recent news of the launch of Advice First, Aifa and IFA Promotion's joint marketing initiative.
Perhaps it is a case of “same old” but then again it may be a positive step forward, if somewhat overdue.
However, a great deal rests on it coming up with a winning marketing strategy and then IFAP implementing it.
I do not think there has ever been as great a need as now to get the message across to the consumer about the difference between advice and the selling of products. There have been a number of very telling surveys about the ownership of financial products and consumer behaviour as it relates to the purchase of such products.
This information is not just sitting around doing nothing. Financial product (more apt than services) providers are using it to formulate their marketing plans and therein lies a threat to the IFA industry.
The FSA's Women and Personal Finance report gleans information from a number of surveys and presents it in a very easily digestible way.
What is clear is that the average consumer in the UK prefers face-to-face advice and is overly loyal to the companies with which they have relationships.
Which companies are best placed to take advantage of these facts? The ones with big captive markets, of course. They also have the luxury of economies of scale – something most of us do not – and the imminent changes to polarisation can only help.
The evidence is out there indicating that bigger organisations are making moves to capitalise on the mass market. Mergers are on the up and a number of partnerships are being set up.
Why should we let this bother us? Any good business knows that its survival lies not only in the acquisition of new business from new markets but also in the service and retention of its existing customer base. In fact, the latter of these, from both a cost point of view and in terms of future sustainability, is by far the safer option.
IFAs with good client relations, retention and high referral rates will continue to do well, albeit they are likely to remain relatively small going concerns. However, newer businesses and those looking to expand could have their work cut out.
Why? The lower end of the market is becoming increasingly difficult to operate in for two reasons – commission is being squeezed and the customer is unwilling to pay for advice.
Many of you may say that the loss of this market is not a problem. I disagree. This “lower” end is not just those people who cannot and will never be able to afford advice, it also represents the young buying their first financial products who in future will represent the middleand high-networth, in essence, the market of tomorrow.
If we lose these people to bancassurers and their ilk now, it will be far more difficult to attract their custom in future years. The surveys demonstrate it only too clearly. The British, as consumers of financial products, suffer from inertia on a grand scale.
You could argue that we have seen all this before. It is not the first time there has been a lemming-like rush to capitalise on market share. Look back far enough and a pattern emerges – the big get bigger and bigger, gobbling up smaller organisations strong in key markets they want to get a foothold in, creating a handful of mega-players. But a few years down the line, there is a 180-degree shift in thinking, resulting in the breaking up of the conglomerate back into its constituent parts. Hanson, ICI and Siemens are just a few names that spring to mind.
Another factor that might feed your complacency is that size and customer service tend to be inversely proportional. However, unlike our cousins over the pond, we do not as a nation complain well and are unlikely to for some time to come.
Spotting trends is a great tool for those who want to play out of the box and can signal future success for their business. But if you have spotted the trends, do not believe it is going to be a bed of roses.
While the mania is going on, it will make for a bumpy ride, particularly if you are in the early stages of growing your client bank. But even for those more established, it may be difficult as potential customers are lured by the big players with big advertising revenues, if somewhat lacklustre product ranges.
If we ride out the storm, our future could be very bright indeed. In the interim, we have to educate the consumer about what makes an adviser different from a salesperson. I hope, Advice First, you are listening.