One tends to see increasing specialisation in most services. Think of the building industry, for example, where there are specialists in roofs, drains, restoration and so on.
In the old pre-RDR days, when advisers were paid by commission, they had little incentive to specialise and most would sell to anyone. Any smattering of specialist knowledge would be picked up from the life offices’ technical departments.
In the new world, where fees are transparent, the issue of value for money is becoming more prominent, which was entirely predictable. As in other service areas, it seemed likely advisers would increasingly justify their fees in terms of added value and, in many cases, that would mean specialisation.
Yet look at most adviser websites and they almost universally stick to the old ‘general practitioner’ model where they claim to be able to advise on almost everything. Indeed, many advisers’ sites consist of little more than lists of areas on which they claim to be able to advise.
Advisers will increasingly be judged on the quality and delivery of ongoing services, and on the specialist advice they can provide.
We are at the early stages of the differentiation between low-value all-purpose general advisers and quality specialist advisers, and this is set to dominate the next decade.
It is true there have always been some specialist firms: advisers focusing on niche client bases, such as medical professionals or expatriates, or advice areas such as educational fee-planning or group pensions. Yet these are a small minority, mainly because effective marketing has always been a skill set in extremely short supply in advice.
In the old days, these specialist businesses got more commission from providers because of their scale and efficiency, so they could be very profitable. Today, they have to get more clients and more fee income from those clients, which is not so easy.
But search engines and social media mean it is getting easier to generate enquiries for specific services. As an extreme example, I recently heard about a law firm promoting its criminal law services online to people who have been accused of downloading dodgy images from the web.
As you can imagine, most of these individuals would rather do a web search than ask their mates at the pub for a recommendation. Naturally, the marketing is only part of it; the firm also has to be able to deliver an effective service defending their clients.
There are some obvious areas that are already being colonised, like court awards for injury or negligence, but Court of Protection rules mean you do need to know a lot and, if you get it wrong, your professional indemnity premiums will go through the roof.
And perhaps it is best to avoid those areas (such as defined benefit transfers) where the regulator could take a rather too close and critical interest in what you do and how you promote it.
Overall, though, there is plenty of room for specialisation in financial advice. The most successful firms of the next decade will be those that most enthusiastically grasp these opportunities.
Chris Gilchrist is director of Fiveways Financial Planning