View more on these topics

The Business of Giving Advice

The statement from the FSA on legacy commission gives clarity at high level but in the detail there is potential confusion.

Legacy commission is one of the main determinants of business value so its preservation or transition to adviser-charging is important. For many firms, the issue is not about clinging to commission but about managing short-term liquidity and increasing the long-term sale price of the business.

Firms should concentrate on how this affects their relationships with key clients. These will be the source of future growth and much of the concern on adviser-charging is based on sustaining these relationships. It is highly likely these clients will need to be reviewed in the 12 months following the deadline, so planning and preparation is essential.

As soon as advice is given to these clients, adviser-charging is on the agenda. The aim is to ensure they value your service, understand the way you are paid is changing and agree to a continuation of those payments. This is the point at which you protect your income – or not.

Firms should be practical and organised in their approach. The pressure is more significant for small firms because client banks may not be diversified, meaning key clients are even more dominant. These must be identified and the value of their annual revenue confirmed. What is at risk and what must be preserved will be clear, along with a list of priority clients who must be moved to adviser-charging as smoothly as possible. This saves the time of a full client-profiling exercise.

Opinion is divided about how to deal with this group. Many advocate a plan that educates clients ahead of their adviser-charging meeting, whereas others want to avoid disturbing clients on an issue that is best discussed face to face. Advisers should think about how clients will react and decide on an approach. The education plan can involve bespoke letters, newsletters or similar methods with the emphasis on service, expertise, and accessibility.

Avoid precise prices until the face-toface meeting, where the strengths of the adviser and business will reinforce service value and benefits. It is important to remember, for most clients, this change will be a surprise and a reminder that advice services have to be paid for. They will not be interested in the regulatory background but will want to know what they are going to get, how much it will cost and if their payments will rise.

Whichever approach is adopted make it top priority and prepare to answer those questions thoroughly. In terms of business income and value, this is a critical change and it must be managed perfectly.

David Shelton is the author of The Business of Advice book and website


F&C outflows reach £7bn as firm looks to cut costs

F&C Asset Management saw £7.2bn of outflows last year. The company’s annual results, published last week, show assets under management fell by 5.4 per cent from £105.8bn in 2010 to £100.1bn in 2011 but profit increased by 7.8 per cent from £38.3m to £41.3m. In March 2010, F&C said it would conduct a strategic review […]

Talk buy to boost Bureau

Mortgage Advice Bureau chief executive Peter Brodnicki says the acquisition of Mortgage Talk will allow the brokerage to boost its share of the newbuild market. MAB bought Mortgage Talk this week in exchange for shares in the MAB Group. MT chairman Peter Birch will join the MAB board as the second-biggest shareholder while Brodnicki will […]

Ex-Kensington director sets up bridging lender

Former Kensington Mortgages director of lending Michael White has set up a bridging lender which specialises in lending to professional sportspeople, entertainers and property developers. London-based Boutique Capital, which is funded by private backers, offers loans of between £75,000 and £5m over three to 18 months. White, who is the managing director of BC, co-founded […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm