Raising the stakes

How do I develop more high-value clients into my business? Nick Kelly and Neill Shillito try to find the answer.

Nick Kelly, Managing director, M&E, Interdependence, IFA Professional Services – (The Tenet Group)

On reading this question, many people may be conjuring up images of joining the masons or networking at the golf club. However, it is important to recognise that high value does not necessarily mean high net worth.

Running an IFA business is no different to any other company and IFAs must recognise what primarily makes them money.You might be best advised first to look closely at your existing client base before investing in wider prospecting activity.

Many clients only engage a professional when they have a specific problem or issue which needs addressing and do not realise the scope of services their IFA can offer.

IFAs should consider actively investing in relationships with those clients they feel could bear fruit. By something as simple as a regular phone call, you are opening up a dialogue, which, if nurtured, could result in a variety of opportunities to increase that client’s value over time. If you want to demonstrate a commitment to a client longer term, you could also think about a gesture towards reducing charges or costs, which can often result in a more trusting and valued relationship.

Ideally, what the IFA can create is a lifestyle relationship based on keeping up to date with any changes in circumstances to your clients’ lives, such as changing job, consolidating credit card debt or planning for university. By assessing and reviewing everyday lifestyle changes and goals, you are effectively conducting an ongoing fact- find that will allow you to maximise your clients’ value and your value to them. You cannot do this with everyone but through email there are many efficient ways to remind past clients that you are eager to help them as their lives move on.

If high net worth is what you are after, however, referrals represent a practical way that many IFAs obtain new clients and any high-net-worth clients you currently have may be also be a good source of the same. This will often happen automatically if your clients get the service they deserve and respond to but additionally, never be afraid to ask for referrals if you feel you have provided a good service.

Obviously, introductions from other professionals is another area that many IFAs consider but you need to be specific in terms of whom you want to be introduced to you and what is in it for them in order for this relationship to work successfully.

Finally, and most critically, firms should try to take a holistic approach to dev- eloping their client base. Consider taking advantage of fee-charging, with clients looking for wider, ongoing advice. The new payment menu represents an ideal oppor- tunity to explain to clients how you can really help them, revisiting pension schemes that may be in wind up or, following the recent FSA advice, to review any with-profits policies that you have sold.

To sum up, assess what high value really means to you and, in most cases, you are likely to be able to develop value from within.

Neil Shillito, Director, SG Wealth Management

It is the goal of most IFAs to have fewer clients but with a higher collective net worth. Not only are high-net-worth clients more remunerative but as a business model it also makes sense to use one’s time more effectively by servicing fewer clients but producing a higher income stream.

The question is how does one go about it? It is probably true to say if an IFA continues selling products, he will not get past first base. The IFA profession, such as it is, is aged over 50 and comprised of insurance brokers who made the transition into financial services, ex-direct sales and, in many cases, the disaffected and dispossessed.

Those of us who have survived are here because we want to be and are, in large part, committed and professional but as long as financial advice is provided on what is primarily a commission-based sales model, you can forget about building genuine long-term relationships with high-net-worth clients. Financial services will only become att- ractive to the more sophisticated and discerning investor when the remuneration structure is inextricably linked to service and advice and when the interests of the adviser are closely aligned with those of the client.

This is not simply a question of fees good, commission bad but, much more important, developing a business model where the remuneration rewards service and advice rather than the sale of a product. The remuneration may indeed come by way of commission, the key differentiation being, rather than it being a reward for a product sale, it is merely one source of payment open to the client.

There is much debate about the role of trail commission and whether it can be justified. The consumer lobby predictably thinks that trail commission is iniquitous without giving any rational thought as to how it might help the client and cement a good long-term relationship between the adviser and the client.

It is important, however, that IFAs should be prepared to offer total transparency by accounting for all commissions whether initial or trail and demonstrating the added value of their advice.

Commission, whether initial or trail, effectively belongs to the client not the adviser. Providing that the client accepts that advice must be paid for and the adviser can demonstrate the value of his service, the client can pay by whatever means he sees appropriate – including commission payments.

It is the ability to demonstrate to a wealthy client that the remuneration is linked to building and maintaining the relationship that will ultimately enable the adviser to develop and grow his client base.

IFAs who would like to find an expert to help them with business advice should email philip.scott@ centaur.co.ukNew Model Adviser is produced in association with DWS Investments


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