Two recent projects we have been working on have convinced me that a simple and almost embarrassingly obvious paradigm shift has to be made by those seeking to serve that part of the market requiring more than the mere satisfaction of an order with a financial product.
That shift is the recognition that the “product” for this market is not the hard financial product manufactured by the product provider but the solution to the client's problem – in other words, a means of enabling the client to achieve his or her financial objectives.
The reason for the shift starts with the harsh reality that, for financial advisers (tied or independent) who wish to do more than merely deliver increasingly low-margin products, it will be necessary to extend their competence beyond the understanding of financial products and outwards into a real understanding of the context in which those products are to be used by the client base.
This is the only way that these advisers will be able to deliver the solution that their clients require. This is not meant to sound patronising although I accept that it may. Of course, for many years, the better advisers have been doing this and that is why they have developed a true relationship-founded business rather than one founded on transactions.
But even for those who have been working in this way, there can be no resting on laurels. The complexities of financial life increase, meaning there is a greater need to spend time developing the skills to understand, effectively communicate and make recommendations in a changing financial world.
It is generally thought – and Steven Covey states this succinctly in his book, The Seven Habits of Highly Effective People – that those serious about their business need to spend around 20 per cent of their time developing production capability. Without this investment, an individual's ability to succeed and drive forward in a complex world diminishes and the long-term future looks unattractive.
With this investment of time, however, the individual is able to increasingly differentiate – an important factor in a very competitive world.
In recognition of this, those product providers looking to distribute their products through advisers (indep-endent or tied) need to recognise what those advisers require from them. At a very sim-ple level, those advisers require a business development partner who will help them develop personally and in terms of their business.
It is at this point that I can turn back to my belief that a paradigm shift is needed. I have looked at this shift in the context of advisers but, as I stated earlier, product providers distributing through advisers are not exempt since they need to align their business with advisers to ensure continuing success and continued differentiation for them in the eyes of advisers.
Of course, there will be those product providers – especially those newly entering the market – which decide to dispense with any human intervention in the delivery pro-cess. But, for those which continue to use advisers, it is inevitable that they must accept that, based on what the buying client requires, they need to be ensuring that the adviser is properly equipped to be effective in meeting these new wider demands.
The product provider, in my opinion, needs to review what it considers to be its core product range. There needs to be a widening of what it understands by its “product”. If it is to facilitate maximum effectiveness of its delivery channel, then it needs to consider carefully not only having good financial products but also good professional development and support of its delivery channel and, increasingly, having the means beyond the core financial prod-ucts to deliver the entire solutions that the discerning market will require.
Imagine an adviser having to tell a client who is interested in making a wonderfully tax-effective pension contribution that, while the tax results explained will be secured, the individual now has to go and seek separate legal advice and services to secure the necessary documentation.
There is absolutely no doubt that (aside from the tax attractions) having the means to implement the complete solution from explanation to implementation is a key reason why so much pension business has been done.
Companies wishing to secure funds under management into their core investment products presumably recognised the necessity for this. They recognise the importance of having more than the mere financial product if they are to be successful in this market.
As a result, the entire pension implementation package including, where appropriate, deed and rules, member communications, and so on, is seen by both the ind-ustry and advisers as being incorporated in the compete solution.
Indeed, it may be that the entire package is seen as “the product” in this context. I believe that in other areas of business, this acceptance of the need for delivery of a wider package to facilitate a complete solution is essential to success.