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Simplicity is the key for successful adviser businesses

One year on from the RDR, successful adviser firms can be seen to share many characteristics, says Heartwood Investment Management’s Mark Rockliffe.

It is now a year since the introduction of the RDR and the new regulatory regime, greater fee transparency and increased scrutiny of the costs of advice and investing.

The new regulations continue to have a significant impact on advice firms’ business models and, in many cases, have forced a dramatic rethink about how client propositions should be structured. While the regulatory environment has become tighter and more complex, the key to a successful business model is simplicity.

Back in the 1950s and 1960s when the US military was designing its U-2 and Blackbird jets, its lead designer Kelly Johnson, believed that systems worked best if they were kept simple and avoided unnecessary complexity.

This might seen odd for a project as sophisticated as the development of a stealth jet but the intention was to build a machine that achieved great things but could also be repaired by any military mechanic with just basic tools. Too much complexity, in other words, would have had a counter-productive effect.

For advice firms, keeping things simple and streamlined is even more important and, in this context, advisers have now had a minimum of 12 months navigating their business models in the new environment, adjusting them to suit the new rules. With impact of regulatory change still being felt by the advice profession, a streamlined business proposition that strips out complexity, delivers maximum value to clients and creates consistent outcomes is more important than ever.

In the years preceding the RDR and since its introduction, many large organisations have chosen to exit the advice profession, creating an increased opportunity for professional advice firms.

We have identified a number of common traits that exist within professional firms which continue to thrive and the following are six compelling and common principles that will help you and your clients get the most out of your offering.

1. Determine your firm’s fundamental beliefs

Everyone needs a philosophy that drives their day-to-day operations. If your entire firm truly believes in something and this is at the core of your proposition, it will permeate all aspects of your client dealings and help to deliver the best result for you and your clients.

It may be that you want to deliver consistent outcomes for your clients or that you believe that each one deserves a hands-on holistic financial planning relationship. No matter what your beliefs, spelling them out and turning them into a philosophy will help you to achieve your objectives.

2. Create a clear proposition for your clients

With the FCA placing greater emphasis on the need for advisers to know their clients, ensure suitability and deliver successful outcomes, it is essential to be clear about what your core proposition is and avoid the pitfalls of straying from this objective.

If your proposition is built around delivering consistent outcomes, the question is, should you take on clients that require you to deviate from this model and, if so, at what cost? If a client does not fit with your business model, it is to their benefit, and yours, not to progress the relationship.

3. Carefully consider the structure of your business

The way in which your firm is structured might not seem particularly important but it can have a dramatic impact on how it operates. Whether your firm is a partnership or a limited liability company, the structure comes with a set of implications. For partnerships, the structure can bring with it advantages but one of the key issues is the perpetuation of the business after a key person leaves.

For limited companies, one of the common objectives for shareholders is creating value that can be realised at a future date. For those who have the objective of selling the business in the future, there is a goal to work towards.

In addition, equity ownership among staff helps with attracting and retaining staff and steering the business in one direction.

However, there is the risk that extended share ownership can dilute the shareholder base and create a divergence of goals and ambitions among those who own the company.

4. Use the RDR to deliver what clients value most

When the RDR was first announced in 2006, FSA chairman Sir Callum McCarthy laid out several clear objectives for the financial advice profession. These were that consumers should benefit from a transparent and fair charging system for advice, that they are clear about the service they receive and and that they receive advice from highly respected professionals.

Immediately following the announcement, advice firms focussed on ensuring their advisers would have the qualifications needed to continue to operate. However, many firms realised early on that, to be successful under the new regime, they needed to compete on the quality of their advice proposition. This led them to look in the mirror and consider their core competencies and identify which elements of their business model they needed to outsource.

5. Become a trusted adviser through regular communication

Perhaps one of the largest opportunities for advice firms when developing client relationships is to become the trusted adviser. At the heart of any good relationship is trust, so it is important to understand how trust is built and work towards establishing it with all clients.

This seems obvious but, with advisers facing many distractions, it is easy for attention to be diverted away from helping clients achieve their goals and aspirations.

Trust is built over time and is the product of honest, clear and regular communication, and of course, satisfactory outcomes. If the client understands what to expect and their objectives are met consistently, this will go a long way to building and maintaining trust.

6. Obtain regular client feedback and use it to improve your proposition

Successful advice firms work hard to fully understand what clients value and evolve their services to meet those needs. By obtaining feedback from clients on a regular basis, whether through follow-up phone calls, questionnaires or surveys, it is possible to identify strengths and gaps and to make changes where necessary.

Furthermore, asking clients if they would recommend your firm to other people, such as family and friends, can help to reinforce positive opinions. It is important, however, to keep surveys short and simple so that clients do not feel burdened by the process of supplying feedback.

In conclusion, the key principles to building an advice firm can be summed up by a simple expression: be brilliant at the basics and avoid over-engineering.

Mark Rockliffe is head of professional intermediary sales at Heartwood Investment Management


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  1. These may be laudable aspirations but they’re far from simple and many (certainly everyone to whom I speak) are saying that simplicity under the FSA’s current rules is simply impossible. Keen to ensure that the latest recommendations I’m proposing to formulate for an investment of £100,000 into what should be a straightforward Income & Growth portfolio, I downloaded my network’s report template and found it runs to 31 pages, including notes. And that’s before I start fleshing out all the sections that instruct You must enter here…, the illustrations, KFD’s, Fund FactSheets, reasons for choosing this particular platform, reasons for recommending each particular fund, my service proposition,, tabulating all the charges including mine, how my recommendations are designed to meet the clients’ needs and objectives, discussing other matters to be considered, etc, etc, ad infinitum. I can see my report with all the ancillary documentation running to 50 pages and maybe more. But that’s what has to be done to meet current compliance standards for what, as I’ve said, should be a straightforward portfolio for Income & Growth.

    As suggested elsewhere, the clients are likely to be totally overwhelmed and bewildered by it all. Regulation has gone totally bonkers OTT. And the FCA (apart from Clive Adamson) wonders why there’s an advice gap.

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