What's wrong with independent financial advice? Nothing with the
principle, of course, but we never seem to be far away from the next whine
about persecution or the rising costs of being in business. Should we
really be surprised? After all, is the sector not suffering from some
fairly fundamental structural flaws?
An ageing demographic, coupled with a pitiful awareness of marketing and
technology means that it is not particularly well placed to operate in the
business environment of 2001. What's more, the previously inept monster
known as bancassurance seems finally to be getting its act together and can
be expected to provide a somewhat stiffer challenge over the coming years
than it has over the last 10. When one considers the continuing
professionalism of companies such as Virgin, it is not easy to see where
IFAs fit in.
After all, while the standard of advice may be strong in places, the
method of delivery is almost universally weak. Even some of the most highly
regarded IFA firms fail to deliver customer-focused service. Whether this
is a direct result of a historic over-reliance on product providers to
furnish information is uncertain. What is clear is that the situation
cannot be sustained as the emerging generation of the reasonably affluent
is unwilling to be serviced on a ham-fisted basis. The emphasis must change.
It has often been suggested that the sector must stop flogging products
and instead focus on selling financial advice. All very well but what does
it mean and, more important, what does it entail?
There are far too many IFA firms in the UK that are run on a corner-shop
basis, with little or no regard for a long-term business model. It is only
by consigning the traditional business model to history and reinventing
itself as a profession that the IFA community will prosper. Alternatively,
it can shelter under the temporary cover of multi-ties before being blown
away once the big life offices realise (again) that a big network of tied
agents is a guarantee of one thing only. And I don't mean profit.
There are a number of potential routes to the “other side”. Generally
speaking, when an industry is facing a radical restructure, it is
confronted with consolidation or must see off the threat of new entrants,
either from abroad or within the same jurisdiction. In the current IFA
environment, both seem to be occurring. Consolidation among the networks is
under way while the announcement that Gemany's MLP is set to launch in the
UK has also created interest. The second of these is perhaps the more
interesting. Surely, given all of the hard luck stories that we hear from
IFAs, there must be limited opportunities for independent advice in the UK?
It cannot be possible to provide quality advice in a professional manner on
the shoestring levels of commission that are available? MLP obviously
believes differently and, given that it has built a successful business in
Germany with a huge market capitalisation,I know who I am backing.
So the next time I hear a whine from an IFA about too much regulation or
too little commission, I am going to suggest they reflect on how good they
have had it, because it is downhill from here unless some significant
changes are considered. There are threats all around you and you have a
more discerning target market. But opportunities abound as the wealth of
that market is growing massively. The challenge is to ensure independent
advice is the first port of call and the high-street banks and other direct
manufacturers don't win.