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Prudent shall ensure value

Last week, I focused on the importance and potentially strong commercial benefit in adopting a “provocation-based” approach to doing business with existing clients and to acquiring new clients – of the right type.

In other words, clients who will sufficiently value what you can deliver and who will be prepared to pay for it – one way or another.

When thinking about their business clients (and potential business clients), financial advisers are in a tremendous position to know about, empathise with and offer advice on the issues that are really troubling them.

As we all know, it is the issues that really trouble people that are the issues that are most likely to result in action.

You will probably find that, aside from issues peculiar to a particular business, the most pressing issues for your business clients will be the same or similar to the most pressing issues for your business.

These could include falling revenues, cost reduction, squeezed margins (contributed to by downward pressure on prices resulting from the consumer’s relentless search for value), access to and retention of cash and increased risk – to name just a few. And don’t forget taxation. This may not be at the very front of a business owner’s mind but it can, nevertheless, represent a significant cost for businesses that are making money.

This is important to remember, as not all businesses are suffering. In most economic cycles, there will be winners as well as losers.

In the current value-seeking, cost-cutting environment, businesses founded on the promotion of conspicuous consumption are probably not doing so well, whereas those offering “affordable luxury” are.

We will all be aware what the current generally unremittingly depressing news does for one’s psyche. It encourages caution and a general hard mentality of cutting back – something that the Government, attempting to encourage spending and borrowing (ironic, given that debt is a fundamental reason for the current malaise) is battling against.

In this kind of environment, there is a kind of peer pressure to be seen as prudent and focusing only on the basics. It is seen as “a good thing”to be cutting back on luxuries, not replacing suits, cars, etc, and “a bad thing” to do the opposite. It is largely unsaid but perceived approbation can be gained from adopting this stance – and being quite vociferous about it.

However, people do need things to look forward to and enjoy and that is where affordable luxury comes in. It is why cinemas are reportedly doing well. Cava, not champagne, M&S £10 meal for two, not dinner at Gordon Ramsay.

What has all this got to do with financial planning? It is important to be aware of and be attuned to the general climate because the general climate will directly or indirectly influence the specific actions of your clients.

When it comes to financial planning, then, there is likely to be a desire to seek value, a desire to cut costs and a desire to retain maximum flexibility over and access to funds.

If one accepts that these objectives may well be relevant for a number of one’s clients, then, by thinking about the consequences of these objectives, should they exist, you can better shape your discussions and your offerings so as to focus on delivering what a reasonable number of your clients may require.

Time spent shaping these potential conversations and offerings could well be time well spent as it is likely that your deliverable will apply to more than a few. You will be embracing the principle of “mass customisation” and putting yourself in a position to get scale on your intellect and understanding.

If one accepts that there will be businesses which will still be profitable but that a reasonable proportion of those may be less profitable – often because they have not been able to cut costs to match reduced revenue – then you have a ready market to preach the gospel of reducing tax cost.

If the end-game is to retain as much of one’s hard-earned profit as possible, reducing the tax overhead will be an essential activity to devote attention to. It should be aligned with an underlying trend that appears to be gathering momentum and importance with businesses and individuals in the UK, namely cutting costs at all costs.

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