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Independent View – Carl Melvin

I fully endorse Tony Byrne&#39s comments in Independent View (Money

Marketing, May 17) where he advised IFAs to recognise that the days of the

one-man-band general practitioner IFA are numbered.

Having built my business over the last six years, I find myself in this

position – what do I do in the future? Continue as a general practitioner

trying to do everything or become a specialist IFA?

The backdrop to this debate is challenging. The low-commission environment

is a reality and likely to be extended to non-pension business.

Over-regulation and compliance are drowning the adviser, operating costs

are increasing and the fun is dissipating. A rewarding career as an IFA can

be achieved but you must make changes if you are not entirely happy with

your lot.

My colleagues and I have taken the view that we will specialise in

profitable clients within a multi-disciplinary practice. This means we will

provide comprehensive financial planning to clients and involve external

advisers for those areas we do not wish to develop actively, for example,

private medical insurance and general insurance. We will, however, develop

specialist services such as investment planning, retirement planning,

pension transfers and related tax planning.

To do this, we need to make a reality check. We only want profitable

clients and, if someone does not meet our profitability criteria, they are

not invited to become a client. Such prospects are encouraged to seek

advice from advisers with no or lower client selection standards.

We want clients we like, people we feel we can work with. Experience has

shown that taking on a client when it does not feel right usually results

in a difficult relationship or the relationship being terminated.

We require clients to pay us on time and understand the value we offer

their financial planning. It irks me when clients want service but do not

expect to pay for it – there are no free lunches here.

By adopting these measures, we have more fun, we deal with pleasant

clients and remain profitable. Of course, we all want clients to be like

this but how do you go about getting them?

There are certain realities that must be addressed first. You must

position your business to attract your target clients. If you want wealthy

clients, you must have an office rather than work from your spare room.

Your office must reflect the expectations of your prospective client with

good decor, quality furnishings and a business-like appearance. Perception

is everything.

You must invest in your skills. Quality clients expect their advisers to

be highly qualified and knowledgeable about issues that affect them.

Effective advisers, good support staff and client service will demonstrate

your ability to add value to the client relationship. The FPC alone will

not cut the mustard in the years ahead.

Invest some of the business profits in developing the business. Practice

development is not a cost but an investment in future profitability. You

cannot expect to be taken seriously if you do not have the basics like a

PC, photocopier, dedicated fax line and so on.

Plan for the future and do not think things will get better unless you

plan for it. If you seriously want to have a business in 10 years time, you

will realise that taking indemnity commission on all regular-premium

business is folly. You must change so your business has sufficient cashflow

when indemnity commission is removed. Start taking non-indemnity commission

to build your future cashflow.

Have funds under management. It is clear that the smart IFAs see the

long-term value in funds under management your business cashflow improves

irrespective of sales and you have a valuable business asset in the future.

You cannot do it all yourself. The small IFA is at a crossroads. Employ or

join together with others who can complement your own skills. This leaves

you to do what you do best while the others help deliver the client

service you have promised. This way, you can specialise within a

multi-disciplinary practice offering comprehensive services to your target


The one thing stakeholder will do is shake up the public to the reality of

the value of financial advice and, hopefully, banish the words free advice

for ever. It is no longer possible to offer free advice because this is the

best way of ensuring your business will fail.

Concentrate on value clients rather than price chasers and you will have a

business of distinction in the future.

Carl Melvin is managing director of Millbrae

Financial Services


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