One of my favourite TV programmes in the early 1990s was Troubleshooter.
Years before Dragons’ Den and The Apprentice made business mainstream, the genial but wise John Harvey-Jones was shining a light on best practice at a time when the UK was experiencing a serious recession.
In one episode, Harvey-Jones visited Morgan Cars in Worcestershire and was aghast to find a company stuck in the past.
Family-owned Morgan was still hand-building a small number of cars a week. The managing director’s pride in having a three-year waiting list was cited by Harvey-Jones as a point of weakness. His advice was to modernise the production process, increase volumes and raise prices.
Morgan rejected most of it. The company did, however, decide to update its factory, to improve productivity and quality control, and went on to grow sales from £3.5m in 1990 to over £40m today.
Another of the companies visited was Velden Engineering. It made a range of specialist precision products but had an outdated machine shop, which affected productivity, leading to low profitability. Harvey-Jones’s advice was to invest in new machinery and improve production. The company followed his advice and today is a highly successful UK manufacturer, still owned by the same family.
What have these old TV episodes got to do with financial services firms today? Both companies had good products, defined niche markets and sound reputations. But their production processes meant they were less profitable, resilient and adaptable than they could be.
Advice firms have historically been high-margin businesses which require relatively low levels of capital. That is likely to change as three factors coincide. First, the war for talent means qualified and experienced advice professionals command increasingly high remuneration packages.
Second, clients are starting to question the value provided by investment firms as they begin to receive regular cost disclosures after Mifid II. Finally, the new senior managers regime requires firms to have proper governance covering processes and software tools.
It might make sense to hire an external business expert to carry out an assessment of current processes to see what changes may be necessary. The cost should quickly be repaid in improved productivity and avoiding white elephant technology. Another big factor is the increasing demand from clients for a more personal and enjoyable experience. Many would rather visit the dentist than an adviser, so making interactions seamless, simpler and more engaging is vital.
When I ran my own advice firm, we always looked at everything we did from our clients’ perspective. This resulted in us regularly removing paper, unnecessary steps, and doing most of the planning in real time with the client. We looked at how clients felt when they interacted with us by asking three questions:
- How would you rate the value we deliver out of five?
- Is there anything we are doing that you would rather we don’t?
- Is there anything else we could do to improve how we serve you?
Firms of the future need to be ruthlessly efficient, have advice processes that stand up to scrutiny under new governance rules, and an amazing client experience marrying objective analysis with subjective opinions and preferences.
Jason Butler is an expert in financial wellbeing. You can find him Tweeting @jbthewealthman