View more on these topics

Robert Reid: It doesn’t hurt to ignore the mass market

ReidRob

Many years ago a friend came to watch me rehearse with the band I was in at the time. Afterwards, he said he was bored as we had played Neil Young’s Southern Man over 20 times. I explained that was what practice was all about: finding your weaknesses, acknowledging them and correcting them.

At the Ideas Lab, we avoid suggesting strategies we have not been involved with previously. That is not to say those strategies we have been involved with have been successful in every case. We make no secret of the mistakes we have made in the past.

My own planning firm has made many mistakes and wrong turns in the 10 years it has been evolving. And as we get ready to rebrand I expect it will continue to do so. In short, I do not know if we will ever stop make changes, big or small, as we grow. Nor do I see any reason to justify it.

I have long believed that the time for change is when everything is going well. So when I hear people telling us to follow unproven processes or to take a less than focused approach, I cringe.

The mass market buys products based on need but I am unconvinced they will buy solutions, which is where the best and most fertile ground exists for professional planners. The mass market simply does not engage to the level they take part fully in the planning process.

So the idea recently promulgated at the CISI’s Financial Planning conference that ignoring the mass market is fatal to the longevity of a boutique-type firm is plain daft and reminds me of the maxim “those who can, do; those who can’t, teach”.

“I have long believed that the time for change is when everything is going well.”

The constant mantra on mass market robo-advice all too often ignores the fact it can be everything a firm offers or simply part of the firm’s toolkit. Few of the early robo firms have delivered profit and some are in a perilous position. That is not to say taking costs out of the advice process is a bad thing. It is not.

To be frank, we all need a typical client profile and we need to make sure our referral sources understand it too. We also need to ensure we maximise the longevity of the assets we manage by delivering service to those who will inherit those funds in due course. That may mean deploying a robo led solution, which then evolves into a full service over time.

Marketing takes time and needs consistency. I am currently selling a house and interacting with estate agents for the first time in years has made me even more convinced that, for local businesses to prosper, clarity in terms of ideal clients is essential.

We need to recognise the trends in the mass market but the certain elements that will impact on our own target group are more important. The pressure on investment charges that will flow from the robo area of operation is a case in point.

Having a defined client profile also helps with proving independence. I cannot see that you could be anything other than restricted when servicing the mass market. A future in solution sales is a buoyant one and enables far simpler evidence of value, which in turn helps with referrals and the flow of new clients.

So the next time you hear you are doing it all wrong, ask yourself whether the person sending that message is a successful financial planning business owner or someone who has never run one well. If it is the latter, treat what they say with extreme caution.

Robert Reid is director at The Ideas Lab 

Recommended

4

Robert Reid: Let’s make advice terms clearer for consumers

I always wondered when phone recording would become the default. It reminds me of the police interviews on television where the twin cassettes enable the defence to get a copy of the recording too. I am keen on the requirement being taken further to video recording, as are the professional indemnity insurers. Of course, some […]

1

Robert Reid: Experts are blind to real advice issues

Research recently published by Citizens Advice on pension freedoms showed that of those who didn’t spend the funds they realised, 29 per cent of them put the proceeds in their bank account. In addition, 9 per cent of people had unforeseen tax problems such as tax deductions they weren’t expecting, rising to 30 per cent […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 25th October 2016 at 9:53 am

    Interestingly we had a financial services industry that was engaged with the mass market and the regulators destroyed it. It was imperfect but it could have been fixed.

    I agree with Robert here. You only have to look elsewhere to see businesses that deliberately set out to pitch well above the mass market. Bentley, John Lewis, Waitrose and numerous clothing brands. They know that you can’t cater to everyone.

    Financial advisers are no different. We need to earn a certain amount on each case just to keep the FCA and FSCS well fed. That means pitching our services higher.

    Virgin money, Tesco and Barclays can have the mass market. They can stack it high, sell it cheap and afford the inevitable regulatory fines when they misjudge the direction of regulatory travel. Small firms can provide a personal service to those that find it valuable and wish to pay.

  2. Not only does it not hurt, if you are a smaller business (i.e. Not a HL) then it is positively advisable to avoid the mass market.
    Robert is one of the wiser heads in this industry and in this particular case he is so very right. Not that I am a particular example, but in my whole career in financial services (30 years – 25 of which in my own firm) I never went near the mass market. No I didn’t make millions, but I made a profit in each and every year and never made a loss. I made a decent living and had clients who were with me for years – many for over 20 and I often dealt with 2nd, 3rd and on a few occasions 4th generations of the same families.
    If you want loyal clients, avoid complaints and have a stable and profitable business – stay well away from the mass market

    • Sorry Harry, there are plenty, of great clients in the mass market 99.9% of my clients would and can be termed mass market…….. you have to choose wisely !

      What i do disagree with is the; throw enough crap at the wall and some of it will stick ! aimed at the mass market

      • If you can make a decent living, keep the clients long term, tread the compliant path and avoid complaints in your sector the well done and good luck to you.

        In the main I preferred to have clients with significant assets who were at least a little clued up as far as finance was concerned. Realative to asserts they pay a lot less in fees than those less well off and the adviser doesn’t need to service hoards of clients to keep solvent. But each to his own if you can make a go of it.

  3. Nicholas Pleasure 25th October 2016 at 11:08 am

    DH – I disagree – your clients are NOT mass market. They may not be high net worth, but they are people who value and are willing to pay for your services and advice. That makes them unusual in the mass market where everyone tries to get everything as cheaply as possible (and usually ends up paying more).

    Most of my clients are not HNW, but I wouldn’t describe them as mass market either.

    • OK
      My point was; 99.9% of my clients “would have/ may have” been considered “mass market” neither poor nor rich (if I may be so crass), the populous (if you will)

      I stand corrected, if that means once they become valued clients, from a hard working back ground, who want to save their money and protect their families, they cease to be mass market ?

  4. I have very ordinary clients, but not masses of them as you cannot serve masses of clients well. I’d make more money serving the same number of HNW clients, but I can make a decent living serving Mr & Mrs average provided I am focusing on the right market segment, which is pretty much the 50+ age group.
    Having level 3 qualified people providing mortgage and protection advice can mean they make a living too and help those clients in different life stages, ready to pass over for investment and pension advice (not mass market) later.

  5. I can’t stand Neil Young’s voice.

    As for clients, I have a broad spectrum and try to provide each of them with a level of service commensurate with the amount of revenue their business generates. It’s pretty simple really. Example: I have a couple of clients who for many years have had nothing with us but a few old paid up pension plans (not taken out originally through me) and a PTA each. I’ve no idea what revenues they generate (probably very little) but I write to them once a year with a table of current valuations and, hey presto, out of the blue, I received an e-mail a few months back announcing their wish to start paying £400 p.m. into an ISA and the need for a re-mortgage (which I referred and on which I’ll get an intro fee). Not mega stuff, but it all adds to the bottom line. In this business, there are no absolutes.

Leave a comment