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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.”



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