Life will continue to be made more difficult for IFAs. Among the factors at work here are:
New technology (delivering cheaper sales and servicing).
Prescribed levels of charges on stakeholder and Catmarked products (reducing margins).
Increased competition from non-financial services groups (mostly abandoning IFAs as a route to market in favour of their own distribution).
To combat these obstacles, there is one area that should always play a significant part in your business strategy – the development of existing clients. But even with existing clients, you should apply Pareto's rule that 80 per cent of business comes from 20 per cent of customers. Therefore, you should focus heavily on those clients with the greatest potential.
Research undertaken in the US suggests that the best way to identify clients with the greatest potential is to focus on the following groups:
Clients who have used your services several times. They have already demonstrated their loyalty.
More affluent clients who you know have significant sums of money.
Clients who have undergone lifestyle changes such as a change of employment, a change in marital status or new additions to the family. Any of these can give rise to opportunities.
Clients who have been a good source of referrals in the past are well worth taking special care of.
What might you do differently for these people? The first thing is to try and see them personally every year. In the meantime, keep in touch using newsletters, Budget commentaries, personnel changes in your office or anything that may be of interest to your clients.
Little things can make the difference. Whenever you send out a circular, why not include a handwritten PS for your top clients? If you read an article that may be relevant to their business or profession, send them a copy. It doesn't matter that they may have read it, they will appreciate the gesture.
Just take a little bit of care with these people. Rather than sending birthday or Christmas cards (anyone can go to Boots and buy a pack of cards), send them a personal letter wishing them the best of the season.
Next, look closely at what you send to people. Most insurance companies do not produce user-friendly renewal packages so you can add value as an IFA by sending a covering letter highlighting the need for clients to regularly review their pension contributions.
It is staggering that the last national census survey revealed that the average contribution to a personal pension is a pitiful 3.25 per cent. When you add to this the inadequacy of state benefits, there is a huge opportunity to drive up increment business, particularly when you tie in consumer research showing that most people aim to retire early.
There is clearly a mismatch between the reality of what they are paying into their pension scheme and their ambitions to get out as soon as possible. If they can be made to understand that this gap exists, there is a significant opportunity to write more business.
Of course, you may not be able to see all your clients in person each year so here is a tip from the world of publishing. If you ever let your subscription lapse to a magazine or a newsletter, you will be sent letter after letter inviting you to renew. Some magazine publishers have up to 10 letters in their renewal series. The reason they do this is because the 10th letter still generates more revenue than it costs to produce the letters.
There is an obvious lesson for us here. If you cannot see all your clients personally and have to send out renewal advice, make sure you send it a good three months before the renewal date and then take the opportunity to write again and again reminding clients to renew. I am not suggesting you harass them. You need to decide how many letters might be appropriate before your client becomes agitated.
Perhaps more than ever, IFAs need to consider the strategies they will employ to grow their business. Certainly, these strategies will include customer acquisition programmes but they should also direct effort toward the retention and development of existing clients.