To succeed in business, you need to appear different from the competition. Being better Is not necessarily a competitive advantage. Being different provides consumers with a genuine choice between Company A and Company B.
Seth Godin explained how this works in his book Purple Cow. It is a simple concept; in a crowded market place, the key to success is finding a way to stand out. You need to become the purple cow in a field of monochrome Friesians.
There is a real danger that the Retail Distribution Review will turn us all into boring, regular bovines. After all, from 31 December we will all hold the same level of qualifications, all operate on the same ‘adviser charging’ basis and all hold ourselves out as either independent or restricted.
Of course, in reality the differences will remain. Only the minimum standard of qualification will be the same, as it is today. Individuals and firms will still be able to differentiate by striving for higher standards. Where diploma was the competitive advantage over certificate in the old world, chartered will offer the competitive advantage over diploma in the new world.
Our charging structures will not all be the same. Some will choose to continue working for ‘free’, only using adviser charging where a customer accepts their advice and decides to implement a product. Others will come up with innovative fee structures that truly reflect the value of what they offer.
When it comes to status, independent will remain the highest standard and restricted will come in a multitude of different flavours. The Baskin-Robbins “31 flavours” slogan could easily be applied to the different shades of restricted advice.
On this subject, I can understand why Lift Financial has made the decision to no longer call itself an IFA, instead referring to itself exclusively as chartered financial planners. The former is a tainted title when used in isolation. The latter has real value with both consumers and professional connections.
What is really powerful from a brand perspective is a firm of chartered financial planners offering independent financial advice. If both are considered the ‘gold standard’, combining the two must result in the platinum or palladium standard.
Our own experience since being awarded the corporate chartered title is that professional connections in particular now set us apart from the traditional IFA firms they have dealt with in the past. As much as we might not like it, the IFA label has become tainted by association with questionable sales practices and excessive commissions.
If you are thinking about points of competitive difference in the final few weeks before the RDR is finally implemented, then Purple Cow should not be the only reading material on your nightstand. The latest Ernst & Young publication One Step Beyond offers more valuable insight into what it will take to survive and thrive in the new world of retail financial services.
To summarise a few of their thoughts, replicating commission structures with fee-based structures is a high risk strategy. Consumers will notice and will reject these contingent charging structures. Recognising the value of advice, and charging for it accordingly, will ensure commercial survival.
Rather than a decision between independent and restricted, Ernst & Young appear to conclude that firms will need to either offer user-friendly execution platforms, or rich face-to-face fee-based holistic investment advice, or both.
Meeting the requirements of the RDR became a side show for most firms a long time ago. Being sufficiently attractive to consumers in 2013 and beyond is the only game in town right now. Even that challenge is fast becoming dated, with new and more important business challenges emerging.
Martin Bamford is managing director of Informed Choice