It takes courage to change and many advisers over the years have made the decision and never looked back, moving from being a company representative working for one company and selling products to becoming an IFA working for clients and selling advice. It is not easy but it is fulfilling and worth the effort.
Company rep versus IFA
Let us be clear about my position on tied agents versus IFAs.
My simple conclusion is that a bad adviser is a bad adviser, no matter which channel they are in. But where everything else is equal, an IFA has to be the best as they have access to the whole market and work on behalf of their client, providing holistic advice. It really is that simple and we are recruiting quality advisers from a company rep background into our IFA business.
Most IFAs within the UK began their careers as direct salespeople and are proud of that. They received training of variable standard due to the broad spectrum of companies out there. So why do so many direct salespeople move to become IFAs?
There are three main reasons as far as I can see.
The first is moral – to be able to act in the client's best interests at all times and not feel compromised.
The second is service – life company and investment houses do not always provide an excellent service and, as this is critical for an ongoing adviser relationship with a client, they like the ability to change supplier if needed.
The third is financial – to be able to earn the levels of income that fit the time and effort spent with clients and be compensated for their level of skills.
Geoff is a company rep and quite successful. His company provides him with some leads but most of his new business comes from his own efforts and his self-generated business is generally of a better quality.
Geoff is getting into discussions with new and existing clients about areas where his company does not have solutions or where the solutions are not credible. This happens, as companies have to make a return on capital invested and may not want new business in certain areas from time to time. Excellent IFAs concentrate on advice areas.
Geoff produces £135,000 of gross commission equivalence at an average of 180 per cent of Lautro rates. Half of this business is investment bonds and half is protection business. Geoff generates single premiums of around £850,000 and £56,250 new annual premiums into protection products.
Within the IFA sector, the average commission rate is lower so Geoff will have to do about £17,000 more commission, or 12 per cent more business, to stand still if he moves to be an IFA. The killer questions are:
How much more business would I do as an IFA from exactly the same client meetings and time spent that I do now?
How much more business would I conduct as an IFA through having the marketing benefit of being an IFA behind me?
Our experience within Worldwide is that a good company rep will definitely be more successful as an IFA and a valuable business with renewal income through having access to the whole-market solutions that an IFA has, access to fee-based planning, links with professional connections and access to the best price and value for an existing client.
But how much better will Geoff be as an IFA? Our experience suggests that Geoff will increase his overall cumulative new business levels by at least 55 per cent through increasing his number of clients by 30 per cent, his recommended actions from these clients by 20 per cent and total premiums from these clients by 30 per cent.
Let us explore those three main reasons for changing again and see if they are achieved.
Moral – Absolutely. Geoff will not compromise his advice to clients and will be able to act in the client's best interests at all times.
Service – Absolutely. Geoff can choose who to deal with at any time.
Financial – Absolutely. Geoff can move from £135k gross income to over £150k.
And there is more.
Clients – people deal with people. As a professional adviser you have built a relationship with your key clients. The 20 that produce 80 per cent of your income, not the 80 per cent of clients that produce 20 per cent of your income and prob-ably 100 per cent of your hassle. These clients will gladly continue to work with you as an IFA.
Renewal commission – you can build up fund-based renewals, product premium-based renewals and add some value to your practice.
Holistic financial planning – leads to multi-sales.
Professional introductions – Accountants and solicitors can only introduce to IFAs.
Re-broking of business – if it is right for your client, then an IFA has to do it.
We know that quality company reps will be pleasantly surprised.