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Nic Cicutti: How do you make financial planning mainstream?

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One of the stimulating things about the financial services industry is that almost everyone working in it has a business idea – or perhaps a new variant of an existing model – they believe will not only make them a pot of money but help consumers at the same time.

As often as not the plan doesn’t quite come up to scratch. But every now and then it helps define the way the industry operates in a given environment. Along the way, a few individuals stand out as a result of their ability to create and popularise a concept, eventually turning it into a stunning success.

Tom Baigrie is one of those people. Already a successful financial adviser, he effectively barged his way onto the national scene with Lifesearch some 15 years ago.

I still remember the day in 1998 Tom stalked into our newspaper office to tell us about the launch, together with Arthur Davies, of a telephone-based life assurance business which he promised would offer the cheapest life cover of any broker on the market, if necessary by cutting back on the hefty commissions the industry was paying for an advised sale.

Tom’s ebullient personality ensured that in a single visit to Canary Wharf lasting barely half a day he managed to get in to speak to journalists from the Sunday and Daily Telegraph, the Independent and Independent on Sunday, not to mention the Daily Mirror and several other red tops.

That weekend the newly-formed Lifesearch received blanket press coverage. Clearly, the company’s combination of simple but thorough telephone operation coupled with low prices was a definite winner. Of course, it helped a little that, back in the day, Tom looked a little like Tom Selleck from Magnum PI.

What few of us journalists realised back then was that Tom and Arthur still kept their original IFA business, Baigrie Davies, going as well. Fifteen years later, it still is and – as he aptly described himself last week in a Money Marketing column – he is now a “30-year veteran still on the battlefield”.  

That particular phrase is a good one: never mind LifeSearch, for anyone to survive 30 years in this business and continue to make a decent living out of what they do is pretty amazing. Baigrie Davies has been around since the mid-1980s and counts many top advisers in its ranks, including one of my personal favourites, Amanda Davidson.

The real question, however, is whether the Baigrie Davies financial planning “model” is appropriate for everyone else in the industry.

Tom contends that lifetime cash flow forecasts as part of the IFP’s financial planning model are best for clients. Nor does he beat about the bush: “We believe we really know what’s right for people of some means trying to best manage their personal finances.

“I’d add that we also think that those that don’t do it our way achieve far less satisfactory outcomes for their clients, notwithstanding the fact that the latter may love them or their investment returns may be excellent and their service perfect.”

In other words, no matter how good you think you are, if you’re not doing what Baigrie Davies does, you’re not delivering the best possible service to your clients.

Unfortunately, I have a problem with that argument. Yes, it is true that, ideally, a financial planning model – as opposed to what passes for “independent financial advice” but is really a glorified sales operation – is the real “gold star” in terms of helping people manage their finances.

I still remember the sense of amazing clarity when one of my advisers carried out a lifetime cash flow exercise based on my earnings and savings to date and showed me where I was likely to be headed in 15 or 20 years’ time.

But it is not true that this business model applies equally to every consumer. Some of us manage to use similar, if slightly less sophisticated financial planning models all on our own, calling in more expert financial advice as needed to help us make the more important decisions. Others, the more confident ones, are happy to go to execution-only services to achieve their goals.

Could they do better if they took the financial planning route? Maybe, who knows – definitely not Tom, whose certainties in the value of his own proposition appear to echo those of a highly successful Bristol-based execution-only broker, coming at it from a totally different perspective.

My final point concerns the Institute of Financial Planning itself. I hold the IFP in great respect, having first attended one of its conferences in Oxford 20 years ago. But not all of the IFP’s members, a fair number of whom I’ve met over the years, are best of breed, in my opinion at least.

Indeed, I’ve met some whom I would never go to for any form of financial advice. They are pumped up with self-importance, jargonistic and appear to focus more on making the client fit their business model than the other way round.

Perhaps, rather than prescribe specific business models and advice solutions to all IFAs, Tom could focus on ways to extend the financial planning concept to a far wider swathe of the population who might need it but can’t afford it. Now that, like Lifesearch, would be a real revolution.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. There seems to be a trend in the financial services sector of saying that one size fits all. People seem to have the need to say that their way is the best and anyone doing anything else is not doing a very good job. Advisers need to firstly decide their potential market and what the needs of those people in the potential market are. They can then design a service that adds value to potential clients at a price they are willing to pay. It is all well and good using lifetime cash flow planning but if the client is not appreciative of what you are doing it will have simply been an exercise in futility.

  2. Nic
    As you know there are many different types of business model – let’s call them products.

    In answer to your question many of us may ask – “Why would you want to?” Our product or proposition is not like that of Tom or the Bristol firm.

    As a member of the IFP I can’t argue with the basic point, but then there is good, not so good and bad everywhere. Yes some members can get very precious about lifetime cash flow planning and George Kinder, but there are also a lot of good competent advisers who do the best for their clients.

    It isn’t only a matter of getting the client to fit your business model, but selecting those clients who you think will benefit from your model. I agree that you don’t want to shoehorn clients into something you can’t or don’t want to provide. For example if the client is looking for a ‘huggy feely’ adviser who will roll out the whole George Kinder spiel, then I’m not the sort of guy they want.

    However I am glad you have recognised the good in the IFP.

    But in the end I guess you will have to accept that proper financial planning will never be main stream. It’s like saying you want to buy a Savile Row suit in Top Shop.

  3. I agree with Anonymous (9:31am). For most of last year, all we heard from providers is that we must have a client proposition, that fund picking is out of date and that they had the ideal solution.

    In reality, every client is different and therefore we took the (arguably controversial) standpoint that our ‘proposition’ would remain whole of market and we’d start each client relationship with a blank sheet of paper and a range of solutions. We’d then charge for our work in line with their requirements (rather than the other way round).

    Taking that a step further, we have the ability to offer cash flow modelling but we see this as an extremity of our service – with the other extreme being a transactional piece of work.

    Most of our clients sit somewhere in between – seeking initial and on going advice and us therefore providing guidance along with way – typically with an ‘end game’ in mind – but not needing the detail cash flow modelling would provide (at a cost).

    I therefore see this as financial planning (but not perhaps ‘Financial Planning’ – if you get my point – and I therefore take the view that pretty much all of our clients benefit from financial planning irrespective of the involvement of cash flow modelling etc given that our advice is based around an objective and we are leading the client towards that goal.

  4. This is a funny article [peculiar not ha-ha] because I’m unsure as to what it is really saying. We are planners but do not believe that an extensive cash-flow forecast is needed or indeed desired in every case. So as Paul above mentions, one starts with a blank canvas and designs a plan for each client as is appropriate.

    Sometimes a quick calculation will prove that something is or isn’t viable, on other occasions more detail is required.

    I suppose every profession will have its exponents who are are ‘ pumped up with self-importance and jargonistic’, that’s just life. Dare I suggest that a few journalists may fit this bill?

  5. I’ve been hearing the words, Proposition, Segmentation, Cash-Flow Forecast, Business Model and so on for the best part of 30 years.
    The wheel has been invented and I’m using it. Talk about teaching your granny to suck eggs?

    An industry full of words and lots of so called experts. You have to laugh.

  6. We are exactly the same as Paul Stocks business it would appear.

  7. Nigel Barker-Smith 28th June 2013 at 12:23 pm

    2 questions to all the contributors so far, if I may.

    With out the George Kinder type enquiry,

    How do understand the clients true and important objectives?

    With some type of cash flow system,

    How do you initially understand and monitor the way you lead the client to their goals?

  8. Nigel old chap it ain’t hard. All my clients want the same thing – a villa in the South of France with a yacht. We work down from that.

  9. Good advisers are good listeners. The good Lord gave them two eyes, two ears and one gob and they use them in roughly those proportions.

    They may or may not have some smart projection tools – which have to make heroic assumptions about earnings, tax, inflation and investment returns – but they do know how to empower rather than control their clients.

    I met thousands of IFAs. I met lots who could talk all day. I met few who could listen.

    That’s the paradox. An industry roundly accused of over selling populated by not very good sales people.

    I’m sure Baigrie Davies are really confident about their modeI. I would still want to take its teeth out.

  10. man on the moon 3rd July 2013 at 9:15 am

    I get where NIC is at.

    As a member of the IFP and PFS I note that there are many good advisors and planners operating in differing ways. The good all hold the Client as the number one priority.

    Cash flow modelling/forecasting in great depth may be fabulous for some but not all. Many people are slotted into the model the advisor/planner wants and many planners ‘appear’ to operate a take it or leave it model. not sure this is so prevalent in real world as it is in IFP meetings.

    my own experience is that a form of limited cashflow modelling/forecasting works better than ‘war and peace’ for all.

    In response to FP for the masses the FSA & FCA have already answered that most people don’t require advice.

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