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Mission possible

Many IFAs will be looking long and hard at their business strategies in anticipation of key influences such as stakeholder pensions, new technology and demographic shifts.

Often this requires a critical review of the company&#39s mission, vision and business objectives. To help facilitate this process, it may be helpful to define these expressions.

Let&#39s start not by thinking about what a mission statement is but, rather, about what it isn&#39t. It is not a financial goal but a statement of where the company wants to be expressed in visionary language.

It is not an 800-page document (800 pages of anything isn&#39t motivational). Neither is it a list of vague positive statements, for example: “We stand for integrity, safe products and good employee relations.” That doesn&#39t give any clear direction to the business.

A mission statement is an imaginable picture of what the future might be. It should be realistic and obtainable. It should be clear and easy to explain to anyone who asks in less than five minutes. Finally, it should provide sufficient detail to be able to guide decision-making in the future.

A useful tool in helping to develop the mission statement comes from a leading strategist, Michael E Porter. He identified three generic strategies – cost leadership, differentiation and focus, sub-divided into cost focus and differentiation focus.

Cost leadership basically means you intend to be a low-cost provider. This is a legitimate strategy and there are a number of people who do buy on price alone. However, a word of warning – people don&#39t buy cheaper, they buy cheapest. In other words, if you are going to focus on cost leadership, you have to be one of the cheapest, not just slightly less expensive than your competitors.

Differentiation means you are going to differentiate your service and products in some way other than price. Independent financial advice is itself a differentiator over the banks, building societies, direct salesforces and new entrants such as Virgin and Marks & Spencer. However, if there are a number of IFAs in your area, then simply saying you are independent will not differentiate you sufficiently. You will need to think of something else.

For example, if you are the only fee-based IFA in the area, then that is certainly a point of differentiation. Alternatively, if you are the biggest and the most long-standing IFA in your area, then you may trade on this as your point of differentiation, assuming this is valued by customers.

The third generic position for a company to take is to focus on a particular area. Having made this decision, you can still choose to be a low-cost provider or to differentiate in some other way.

An example of a cost-focus approach would be the discount brokers that advertise in the weekend press. In contrast, an example of a differentiated-focus approach could be an IFA such as Medical Insurance Agency. Its focus on a specific market is also its point of differentiation. It claims to know more about the needs of medical professionals than any other IFA but it does not claim to be less expensive than any other IFA.

Another example of differentiated focus would be those handful of IFAs which specialise in ethical investments.

Now you have a mission, you need to start setting some objectives for the business so you can translate your mission into something tangible. Objectives must be expressed in financial terms, capable of quantification and, perhaps most important, measurable.

We said earlier that plans should be realistic and obtainable. If the plan is considered unobtainable, that won&#39t inspire anyone. Staff and those who have to implement the plan will not have sufficient confidence in it to make it happen.

While that is undeniably true, you should set challenging objectives to overcome what is known as the “grunt” effect. If you simply set an objective to increase sales by 10 per cent a year, then everyone will work a bit harder and you will probably make 10 per cent growth.

In contrast, if you tell people the rate of growth has to be 30 per cent year on year, they know they will not achieve that simply by working a bit harder, they will have to re-examine the way they do things.

By making people look long and hard at how they do things, you push them out of their comfort zone and force them to confront change. In the financial services market of tomorrow, those IFAs that do not force their staff to confront change will increasingly find it difficult to grow their business. There is little room for complacency.


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