Most advisers would agree that the relationship with their top clients is hard-won and valuable – possibly the most valuable asset an IFA has. It is more than renewals and asset-based fees, it is even more than future business potential, it is the very essence of the IFA role.
Advisers exist to help people make decisions and take positive action that is in their interests but which they would not do unaided. It is a special relationship between two individuals, yet it is often assumed that the client “belongs” to the business that the IFA chooses to work for.
The client knows the IFA and trusts them and may have no loyalty or affinity for the bigger organisation whatsoever, yet a weasel-worded contract could prevent them dealing with the very person they trust to advise them should they leave or be dismissed. How can that ever be treating customers fairly?
I smile at the businesses that seek to acquire, acquire and acquire again. Often, their leadership has no knowledge of the practical IFA role. They may once have been advisers but, frankly, would now be a liability. These are capitalist wolves feeding on the cadavers of smaller IFA businesses struggling to cope with the increasing burden of regulation and professional indemnity insurance. Why should they or their shareholders “own” a relationship? Is it not the decision of the client who they work with, now and in future?
Like most cannibalistic business plans, many seek to commoditise clients and build value in order to exit as quickly as possible while paying lip service to the importance of long- termism and planning.
Years later, when clients turn to the ones that “own” them for advice, who will be there? Probably nobody. They will have sold out for a quick profit.
Ironically, it will be down to the same adviser who was banned from contact to pick up the pieces. This is fundamentally wrong and should be a consideration in the TCF guidelines.
The problem is that most IFA business models are worthless without the ownership of clients and their renewal income. These clients are viewed as purely cash-generating commodities that can bring home the bacon, even through recessions and downturns. This is why IFAs value them so much and want to ensure they are looked after, by delivering good quality advice and service.
What really makes me seethe is when I hear so-called IFA and tied businesses talking about the importance of advice over sales and how they are committed to staying on the advice side of the equation, then structuring their entire business around sales figures, evaluating individuals solely on their ability to generate fees and value.
If they are so committed to advice, where are their pro bono departments based in inner cities helping the underclass get out of poverty? Where are their voluntary support groups for schools and universities addressing financial ignorance and the misuse of debt? The truth is they are committed to sales and profit.
In these times, when the regulator does seem committed to treating clients fairly, I hope they have the strength of character and mind to fly in the face of the pressure groups and companies that seek no more than a quick buck and the exit.
Steve Buttercase is senior adviser at M2 Financial