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Nick Cann: Advisers need to demonstrate their alpha

As the New Year unravels, it has been noticeable so far that all we seem to see is criticism of certain business models.

As usual, commentators are wishing to knock progress and success rather than fully understand best practice and take the aspects that are working really well and apply them more broadly.

Having sat with Fay Goddard as one of the Money Marketing Awards judges, it was really encouraging to see what some businesses have achieved over the last few years. There are some great models emerging and the consistency here is that the client has been genuinely identified as the most important person in the relationship.

Financial planning, as opposed to product centric advice is where the real value lies and tools like cash flow modelling are becoming essential to support this six stage process.

It would appear that at the end of month one, most of the lights are still switched on in adviser offices. This is very good news, but despite the recent rallies in equity markets some businesses still have a lot to do in order to remain confident of surviving and growing at a time when the direct to consumer market is gathering momentum.

This should not be a threat to financial planning businesses but it will be a threat to those businesses that rely on product selling or price differentiation.

In order to differentiate, more and more companies have identified that their advisers need to develop skills to support their strong technical knowledge. This will ensure that the right balance is brought into the business.

The other key ingredient for many firms to de-risk the business further and allow the advisers to spend more time with clients generating revenue is the effective integration of the paraplanning role.

Advisers who have so far attended the IFP’s new Integrated Financial Planning programme have not only refocused their attention but gained in confidence as to where the value of their service really lies.

They can more effectively demonstrate this value to their clients and establish trust, generate more realistic fees for the work that they are doing and build profitable, long term business relationships.

At a recent meeting, it was suggested that I should consider an adviser’s Alpha. For years we have been asked to consider the alpha of a fund manager and of course some have delivered and some have not but often it is unclear what it is.

The same will very much apply to a financial planner. Where is it that they are really able to add to the relationship and ensure that clients really benefit from the experience, not only today but over the lifetime of the relationship?

As firms address the challenges of 2013, consideration should very much be given to this aspect.

The media will again dig into the subjects of historic trail commission and ongoing fees ,while the critics will always focus on cost and charges. As a profession, we need to focus on and promote value and necessity.

Clients will recognise their financial planner’s alpha because their feedback and experience will confirm it. Having been fully engaged in the planning process, they will see specifically what their plan looks like.

They will have worked with their Financial Planner to determine their all important goals in life and established a plan to achieve them. The planner will be looking after all their financial affairs as a result, and not just a percentage with some remaining undisclosed.

The volume of referrals will undoubtedly increase as clients talk excitedly about the experience with their friends and colleagues.

When we are able to consistently deliver a professional service that not only excites clients but puts them in a far better place than before the relationship began, even the most cynical will have to applaud and pass favourable comment.

Nick Cann is chief executive of the Institute of Financial Planning

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. BUT, without suitable and well performing financial products and investments financial planning is just a wish list. When will these “experts” realise that you cannot drive on the road without a motor vehicle (unless of course you use a bike, but that still needs to be bought to ensure transport)

    If a client is willing to pay fees for financial planning, the are entitled to see that their money is being used to ensure they have the right products to meet their needs.

    You cannot insure a life without a life policy, nor protect income without income protection and as for pensions, the tax breaks of pension plans far outweigh building capital other ways.

    Who the heck decided that getting the government to put in 20% or more added to each contribution a client makes, wasn’t worth investing in?

    It is now the providers of these products that need to step up to the plate and move forward with lower charges, better adviser fee facilities and better performing funds.

    Otherwise the holy grail of “financial planning ” is a crock.

  2. Ned, the problem with pensions is not the pension, it’s the outdated decumulation products available at the end ofthe processes and successive government tinkering with clients retirement income.

  3. Your becoming all most religious Nick with these constant sermons.

    The RDR has come and gone. Financial planning is not the saviour. It has its place.

    Without funds and products its useless.

    I’ve stopped using Twitter because this preaching has become very tiresome.

    Please stop it. And No. I’m not joining the IFP again.

    Richard

  4. Nick

    Do you actually know what you talking about ?

  5. I don’t actually see what Nick & Ned have said is contradictory.
    You cannot have passive funds without active funds, but you can have active without a passive market.
    You can have product sales without planning, but planning without products is just a conversation, someone has to implemment/ act / choosenoit to act.

  6. I received an e-mail from a client the other day that said Thanks Julian, you’re a star. Sorted.

  7. @ Julian Stevens

    You’re not a white dwarf, surely?

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