Rather than servicing low-value clients at a loss or turning them away altogether, IFA firm Plan Money provides a non-advised online service through personal finance comparison website Payingtoomuch.com.
“Like most IFAs, around 95 per cent of our business comes from referrals and recommendations,” says Plan Money director Peter Chadborn. “But how do you say no to a client who has been referred to you?
“What happens when a valued client refers someone to you who would be seen as low value? Or when a high-value client wants to do a low-value transaction?
“Every time you say no, you create a hole in the circle. The risk is as soon as you turn someone away, they will look online, and who is to say non-advised services will not offer them something like cheap life insurance?”
Plan Money’s non-advised service, Plan Direct, provides comparisons in sectors that IFAs do not usually get involved in, such as motor insurance and energy tariffs. It also covers a range of personal insurance types including life and critical-illness cover, with comparisons made on features as well as price.
The service grew out of pre-RDR discussions between Chadborn and other advisers about what to do with low-value clients once the fees-only regime came in.
“Advisers were saying they could either service those clients at a loss or let them go, and that is one of the great unintended consequences of the RDR,” says Chadborn.
“We thought: ‘This can’t be right. Surely there is a way of providing a service to anyone and everyone, albeit not a fully-fledged financial planning service that they would have had in the past.’ And lo and behold, we found ourselves muttering about non-advised solutions,” says Chadborn.
Customers who click on the Plan Direct part of Plan Money’s website select the sector whose prices they want to compare. They are then taken to the relevant page on Payingtoomuch.com, which identifies the user as having come from Plan Money.
As a small IFA firm, Plan Money could never have built Plan Direct itself because it lacks the resources. “We needed a ‘plug and play’ solution that we could co-brand and plug into our website,” says Chadborn.
Payingtoomuch.com was selected as Plan Money’s partner for the project partly because its founder, Michael Ward, is experienced in the IFA market as founder of Direct Life & Pension Services.
“We wanted a partner we could trust and respect which had an idea about the IFA market. Payingtoomuch.com isn’t just about finding the cheapest product; it’s about comparing features,” says Chadborn.
Plan Direct is not intended to provide a revenue stream for Plan Money. But tapping into areas not traditionally associated with IFAs brings in earnings that Plan Money would not achieve otherwise through a commission-sharing arrangement with Payingtoomuch.com. Like other comparison websites, Payingtoomuch.com is paid a commission by insurance companies or service providers which are included in its offering and Plan Money receives a share of this.
The premiums and costs quoted are the same whether customers go directly to Payingtoomuch.com or through Plan Money’s website.
Chadborn highlights the importance of offering a non-advised service that is cost-effective. “The cost to us has been the one-off cost of integrating it into our website; we don’t get involved in ongoing costs,” he says.
“To us, it’s a no-brainer for an IFA firm. Why wouldn’t you do something like this? It doesn’t cost much, it stops you having to say no to clients and potential clients and it generates a small revenue stream from new business areas.”
Chadborn says there has always been a feeling of “them and us” in relation to IFAs and non-advised services. But from a regulatory perspective the boundary between the two is a grey area that advice firms have found confusing.
Chadborn is adamant that human interaction is the distinguishing feature. “The non-advised service has to be at arm’s length, with no human interaction, to prove that it’s not advice,” he says.
Looking ahead, Chadborn wants Plan Direct to move into investments.
“When we move into the investment space, that is regulated, so we will have to be clear that it’s non-advised only,” he says.