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Sticky situations

Continuing the theme of doing business in today&#39s challenging

marketplace, I am going to reiterate my belief that communication

between advisers and clients is essential. It&#39s the glue (superglue,

actually) that holds the relationship together. The fact that there

may not be a direct product-related reason to communicate should not

deter this communication.

•How you communicate?

•Who you communicate with?

If you are in the business of giving advice and not merely picking

products, you have satisfied one of the key criteria for being a

financial adviser. Over the past few weeks, I have had the

opportunity to speak to a number of IFAs and the very obvious point

has been made to me that it is all very well banging on about how

valuable one&#39s advice is but, if clients won&#39t pay for it, they

cannot be forced to – unless they have contracted for advice and not

paid the agreed fee. Then you can sue them.

The key point is to target your value-adding communication and advice

at those who value and are prepared to pay the asking price for that

advice. I have probably not made a bigger statement of the obvious

except maybe that Arsenal patently cannot hack it in Europe.

Now we can look further at how to communicate – and this has a real

impact on how much you charge for your services. The greater the

human interaction, the greater will be the cost of supplying the

advice. Certain deliverables have to be delivered without human

interaction if costs are to be controlled. The most obvious example

is the 1 per cent suite of products. Without human interaction, the

cost constraints to the provider can (just about) be adhered to and a

profit still made – eventually and if fairly demanding volumes are

secured. But it has been found that volumes are hard to secure

without human assistance.

To ensure the most effective delivery of advice takes place, it is

essential to found it on human interaction but not exclusively. Costs

can be driven down without impacting on the overall quality of the

deliverable if a combination of communications are used:

•Face to face.

•Telephone.

•Electronic (email/web).

•Mail.

The key, as far as possible, is to secure scale on intellect. This

can only be achieved by effective and timely communication without

human interaction. This secures the benefit of cost minimisation and

greater regularity. Ideally, a client could select the means of

communication that best suits him or her. It is also possible to

secure scale on face-to-face interaction through seminars. Outside of

seminars, the human interaction is then confined to periodic review

meetings and times when action is needed. This balance enables

constant contact to be maintained and for there to be justification

for a reasonable level of retainer fee.

A client could conceivably choose a menu of how he or she wishes to

be communicated with. Depending on which mix is adopted, different

fee scales would apply. It would then be feasible for the client to

indicate key areas of concern, enabl ing the adviser to target

communication effectively.

Tax planning is an excellent reason to communicate. With the Budget

advancing upon us, there will be a very big reason to communicate

with many clients. By carefully categorising clients, it will be

possible to secure scale on intellect as there will be categories for

whom the same communication is relevant. This process is known as

mass customisation.

As well as specific communication to particular clients, having an

awareness of trends in the society that forms one&#39s marketplace is

essential for any business. If one can be aware of and anticipate

what drives demand for particular products and services, a business

can better target its activities to market segments where response is

likely to be positive. This will contribute to the effective use of

time and effort.

I recently considered some key findings from the 2001 census that may

be of interest. For each finding, I will suggest a particular

opportunity for advisers/product providers.

•8 per cent of UK residents are born outside the UK. So what?

Many of these are likely to be non-domiciliaries for whom significant

income tax, capital gains tax and inheritance tax

minimising/avoiding opportunities exist using products such as

offshore funds and bonds and/or appropriate trusts.

The excluded property trust, providing for continuing freedom from

IHT in respect of non-UK-sited assets, is worthy of consideration.

This is especially so as the non-domiciled settlor can be a potential

beneficiary without destroying its IHT efficacy.

•Nearly 20 per cent of people are educated to degree level. So

what? Advance planning for what will usually turn out to be

significant levels of expenditure should be a subject in which there

is considerable interest.

•One in eight people of working age have an illness or health

problem that limits their daily activities or work. So what? This

statistic should be used in a campaign to encourage the take-up of

health insurance and critical-illness cover.

•Few than 10 per cent of adults are cohabiting couples. So what?

This is still a significant number. The lack of a marriage does not

diminish the importance of a review of protection needs. It should be

borne in mind that the spouse exemption for IHT only applies to

legally married couples.

•There are 290,000 self-styled Jedi in the UK. So what? May the

force be with them.

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