View more on these topics

Redressing the balance

Two Succession members discuss the biggest challenges facing their businesses in the run-up to RDR

Julian Milner, Managing director, Sigma IFA

Traditionally self-employed, the employment status of IFAs has come under the microscope as firms evolve for a new regulatory regime.

Sigma IFA was formed in 1997 and incorporated in 2004. It is wholly owned by me and has offices in Colchester, Birmingham and Kent and primarily operates in the Home Counties, working with 15 self-employed IFAs.

Sigma believes that employment status should be a question of how advisers pay tax and not dictate the culture of the firm, particularly around client ownership.

That the two have become entwined is a mindset that needs to be changed and we are working through a number of initiatives to redress the balance.

The rationale for such a strategic shift lies in:

  • The creation of a new business model offering a consistent, branded client service proposition rather than individual strategies from a disparate group of IFAs. We believe we will be more successful by pulling in the same direction but without the buy-in and support of our advisers, we cannot exploit a house style.
  • The cost base of old-style advice coupled with a new-style service proposition is not viable. We can no longer take full liability, regulatory responsibility, responsibility for the support team and all the risk, while individual IFAs write business.
  • A desire to build an inherent capital value for our business. Controlling the relationship with the client is key to this.

Sigma introduced a lifestyle financial planning service model at the end of 2011. The individual client relationship under our new model will begin with an initial meeting with a very experienced lifetime planner. Once the client’s objectives have been set, a fully qualified IFA with the support of a paraplanner will act as the client’s account manager.

Our team of 15 experienced advisers recognise that engaging with the consumer in an RDR-compliant proposition involves the revised positioning of the corporate entity as the primary brand. Delivered by the adviser as the primary relationship manager and supported by the firm’s processes and back-office staff, the process allows the consumer to become a client of the corporate entity, maximising the real value of the relationship.

Not surprisingly, our advisers want to be part of our bigger picture, longer-term strategy but the tax implications alone have been enough to dissuade some from considering shifting to employed status.

To address this, we plan to run a dual model, recruiting for employed advisers at the same time as creating a model in which self-employed IFAs become responsible for their individual profit and loss accounts on a monthly basis and are charged for the shared services they use in a similar way to legal practices.

It is evolutionary and hopefully will give our advisers time to get comfortable with the idea of employment without distracting from the all-important changes to the service proposition.

Rules of re-engagement

Mike Beckwith, Westminster Financial Planning

Most service providers struggle to identify their profitable clients. Utilities assume it is the customer paying by direct debit and therefore offer reduced unit pricing as an incentive, transport providers assume it is those booking in advance and cheaper tickets are the carrot and financial advice professionals assume it is the client with a six-figure investment.

Westminster Financial Planning, a London-based chartered financial planning firm formed in 1997, joined Succession as a member in 2010. Our process of identifying core clients and their needs began in the usual way. We pinpointed our top 100 clients, analysed their needs and the cost of that level of service.

There were no real surprises – we knew our client base pretty well – but the exercise did uncover some profitable clients that we had overlooked. For us, the issue was not why we make the change but how and beginning with the end in mind provided the motivation we needed to change.

For perfectly valid reasons, we had fallen into the habit of meeting every client need, regardless of the cost to our firm in terms of distracting advisers and back-office staff from our core and profitable activities. RDR meant that now we could create a business strategy that focused on the most profitable parts of our business.

The detailed analysis equipped us to make a bold decision – to outsource anything outside our core competencies and refer non-core business to external sources.

Now that we knew what we were doing and who we should be doing it for, it was time to articulate clearly that service proposition and communicate it to existing and potential new clients.

We broke down everything in detail, from regularity and frequency of meetings and reporting, whether or not a financial planning service should be included (and what exactly it would entail), how we would measure attitude to risk and, crucially, how we would work with clients to provide an improved and valued service.

We have not yet fully addressed those clients that are outside our service proposition, opting instead to market to them, view regular communication and pull these prospects into our new client proposition.

Westminster’s great advantage is that we already worked as a team to service all the company’s clients. A unifying theme and strapline brought together key elements and formed the basis of new marketing material, from our website to brochures to client letters. In all, we spent around £30,000 but the subtle shifts in our marketing equipped us to reposition our client service proposition, enabling us to re-engage with the right clients and make it clear they are supported by the expertise of the firm, not individual advisers.

For us, this translates as: “Our role is to help our clients identify and maintain their desired lifestyle without the fear of running out of money.”

Recommended

21

Liversidge Vs Cardy: Who should represent IFAs?

’Aifa hasn’t betrayed independence and the door is open to make common cause’ Aifa has been roundly denounced by some for supposedly betraying the “independent ideal” following its decision to continue to accept as members those firms who might, after the RDR, find themselves defined by the FSA as restricted. The denunciations are ironic to […]

3

Friends Life puts the focus on quality over price

Friends Life says it is looking to compete on product quality rather than price following the launch of its individual protection proposition. The company’s Protect+, which launched this week, represents the combined protection product range across the Friends Provident, Axa UK Life and Bupa Health Assurance businesses. It follows the soft launch of the Friends […]

mm paulmcmillanside

Leader

The Pensions Regulator seems to have plenty to say for itself at the moment so we decided it was time Retirement Strategy caught up with its executive director of DC June Mulroy. Later this year, TPR will publish the 11 principles it wants to act as a blueprint for trustees, employers and providers in the […]

L&G group Q3 sales remain at £1.3bn

Legal & General’s worldwide sales remained at just over £1.3bn in the third quarter of this year, unchanged from the corresponding period in 2010. Savings investments new business increased 14 per cent from £486m in Q3, 2010 to £555m in the corresponding quarter this year as the provider benefited from partnerships with banks and building […]

Japan Economic Insight

James Dowey, Chief Economist, and Paul Caruana-Galizia, Economist

The conventional wisdom is that following a roughly 50 per cent rise in the stock market in 2013 in Yen terms, the Japan trade is over and done*. So the story goes, those big gains were due to a one-off boost from quantitative easing (QE) and a depreciation of the Yen — policies that one should think of as a palliative to Japan’s economic weakness, but not a cure. Rather the cure, and by implication the necessary condition for a longer-term investment case, is deep structural reforms — a painstaking re-weaving of Japan’s economic and social fabric, no less. The story continues: this is a much tougher test than launching a blast of QE, and one that prime minister Shinzo Abe, although well intentioned and well supported by the public thus far, is likely to fail. Stick a fork in Japan, it’s done…continue reading

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment