News that the Institute of Financial Planning has launched its “great minds think alike” campaign takes me back to my childhood as we had a set of drinks coasters with that very phrase on one of them.
Synergy among firms can be very powerful, provided a common direction can be determined in early course. Indeed, common purpose, the agreement of one, will be crucial if we are not to see the mass collapse of firms after the RDR. The continuing reliance on self-employed advisers is not helpful as their personal agenda rarely aligns with the firm’s agenda.
Moving to an employed adviser force is one of the key decisions of the RDR but currently the capital adequacy roles positively encourages self-employment over the employed model. I cannot believe that this fact is lost on the Financial Conduct Authority and fully expect this artificial advantage to be removed in due course, so long-term plans relying on no change are doomed to fail.
More immediately, and following on the heels of the Towry v Raymond James case, firms need to be asking themselves if it is totally clear who “owns” the client?
This is absolutely central to the valuation of many firms. If they only “own” a slice of the client base, the valuation will be based on that proportion. It is essential that advisers’ contractual arrangements and remuneration are adequately structured for the RDR.
This needs to include clearly understood parameters in relation to post-employment dealings with the firm’s clients, that is, non-solicitation clauses or the more restrictive non-dealing clause.
The best way to protect the firm is to make the strongest connection between the firm and its clients instead of between adviser and client. Comb ining that approach to the client relationship with services in a format that is difficult for others to replicate is the best defence to client loss on the departure of advisers.
Just as important, there needs to be a more robust alignment of remuneration and activity if clients are to remain with us for the long term. Firms need to ask themselves, could a smaller number of advisers deal effectively with the client base and what impact will new processes have on the number of advisers required? Could advisers move into the role of introducers? For me, the idea that an experienced IFA will be able to easily slide into a passive role in the advice process is dubious at best.
It troubles me that complacency seems to have set in with some of us avoiding the difficult decisions, exams being just one of them, and what to do with advisers who do not achieve QCF level four. Is it feasible to retain them?
Returning to the IFP campaign, the coasters had the complete phrase on the underneath, “great minds think alike but fools seldom differ”. This is not to ridicule the campaign but to merely remind us all not to become overconfident. After all, we need to engage the public, not to distance ourselves or, worse still, patronise the very people we seek to serve well.
Robert Reid is managing director of Syndaxi Chartered Financial Planners Twitter: @reidremoney