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Tom Kean

In business, one has to respond to change quickly whether one likes it or not – not doing so would be foolhardy. Things happen that disrupt what is sometimes a comfortable status quo. If ever a profession could boast about coping with change, we are it.

The tenacity of our pensions and investment world is legendary and is probably the most innovative and vibrant investment climate in the world. You only have to visit places like Australia to realise how stagnant things can be.

I am constantly looking for different ways to add value to our clients&#39 dealings, and it is not easy – for every 10 ideas, nine are not appropriate. My most common reason for rejecting ideas is the “you can please all of the people some of the time…” line. What is ideal for one client would enrage another.

Traditionally, we have taken a relatively laidback or, as we prefer to call it, client-driven approach to service – but we make this clear from the start. For every 10 positive comments on our approach, we get one negative. My feeling is that this is pretty good and it suits us. It would not suit every one however, so strategies must differ for each firm.

The pressure on IFA firms to improve efficiency must eventually lead them to consider the mass market – high volumes and low margins. Whether you like it or not, people are buying this way these days, and because of the internet (which is great for this style of business) will do so in ever increasing numbers. Diversification is crucial in both good times as well as bad, so must be included in any firm&#39s game plan.

Why do you think all of the big firms out there are filling all the distribution channels? The writing is definitely on the wall for them – and so it is for us. To think we are any different or in some way immune to this way of life would be naive.

However, as with any new venture, there are numerous pitfalls to be wary of. Even the experienced “mass marketeers” can get it badly wrong. Newspapers regularly run stories of organisations getting in a muddle over something. The number one blunder seems to be cross-selling.

The popular “excuse” given after such a slip up is a computer problem. This confirms that your marketing drives (or customer relation exercises?) are only as good as the computer system you operate and the quality of the data stored on it. Indeed, the staff who run it can also have an impact.

We discovered to our cost a few years back that employing poor quality staff can lead to embarrassing errors. In fact, only firms with almost military-style administration should embark on this type of business. To do it half-heartedly invites disaster.

The way forward then is to make small moves. Make your mistakes in small numbers to start with, as they are sure to happen. No amount of checking and cross-checking will eliminate the odd error, so be warned. As I said above, not everyone will like you for it. But if you are not doing it someone else will be – and if nothing else, people expect it these days, as they expect you to have a website.

Of course, you may think your own firm does not need to consider it, for whatever reason. But that attitude brings you back to the diversification argument. I do not see the likes of Standard Life thinking like that. If it is good enough for it to maximise distribution, then at least some form of (specialised?) mass marketing strategy should be part of your business plan.

IFAs currently hold a trump card – the option to rebate commission. Clients dealing direct do not have the option to enhance contract terms as we do. This fact should be made aware to every client.

Tom Kean is compliance officer at The Analysts (Pensions and Investments) DOCB:

SRCE: Money Marketing

PDAT: 270901

SCTN: The New Advisers: IFAs and the mass market

PGNO: 62


HDLN: Reaching out

SBHD: Balancing new business generated through mass marketing against the core values of being an IFA will require some careful juggling BYLN:


The “pile &#39em high and sell &#39em cheap” approach is a difficult one for IFAs to adopt. After all, for most people, the raison d&#39être of the IFA is face-to-face advice.

Without that personalised input, what is to stop the consumer going to high-street names direct?

Nevertheless, some IFAs are exploring means of bringing in extra business through mass marketing. But balancing any new business with the core values of being an IFA requires some careful juggling.

Torquil Clark is an IFA which has built up a strategy of a large, execution-only discount business alongside its face-to-face advisers. Investment manager Philippa Gee is sensitive to the mass marketing tag, emphasising the firm&#39s policy of eschewing mass mailing. Clients can even opt out of receiving the company newsletter.

However, the majority of Torquil Clark&#39s business is channelled through the firm&#39s website, which Gee describes as “a very important part of our business” and consists of execution-only business. She describes the two parts of the business as “co-existing together, but separately”.

Rather than lose clients to providers who sell direct, the firm can make sales to those who do not want to have advice and sell at big discounts at the same time.

Sometimes, she points out, after accumulating a certain level of assets through execution-only purchases, customers may feel the time has come to arrange for face-to-face advice from the firm&#39s advisers about what to do next.

Compass IFA director Chris Morgan says: “We are not Wal-Mart”. However, the niche his firm occupies has allowed him to develop a successful mass marketing dimension to his business. His target audience, primarily gay men, has long been discriminated against, particularly when purchasing life insurance.

Morgan offers non-punitive life insurance for his clients most effectively on the internet, where some 50 per cent of his business is now generated.

Morgan&#39s approach is facilitated by having a largely captive audience with a particular need who are also more internet friendly than average.

Of course, the general public are not the only potential market. Nightingale Associates principal Michael Lockyer spotted a gap in the market and alongside his traditional general IFA practice, has set up for IFAs and employers looking to outsource stakeholder designation and scheme population.

Lockyer claims it allows an IFA to establish up to 20 group stakeholder schemes a day, for which the advisers relinquish half of the commission they would otherwise have received. Like Torquil Clark&#39s model, the discounts that result from bulk buying and technologically-enabled high business volumes are a primary attraction.

As operates on a direct offer basis, there are few regulatory complications. Lockyer contends that IFAs have long carried out this kind of work, albeit in smaller ways.

For instance, the larger employee benefit consultants will offer advice to the employer and then deal on a direct-offer basis with employees.

Lockyer says the providers have been selected to conform to a variety of criteria, not least fund performance and their technological compatibility. However, some could argue that the selection has a certain “halo effect” as the choice comes from an IFA.

It is not clear what long-term impact this will have on public perception of the IFA, or whether this will erode any of the core values.

For Lockyer, initiatives of this kind ensure the survival of the traditional IFA activities as they become more and more directed at the high-net-worth end of the market.

What all three examples have in common is a reliance on the internet.

“The current environment is coming as a rude shock for many IFAs,” says Lockyer. “You simply cannot shift sufficient paper or employ enough people to make things like this work without the internet.”

He does, however, add that obtaining the funding for the considerable costs of setting up a fully-functional website is far from easy.

Lockyer does emphasise that projects such as are not in competition with IFAs – after all he is one himself.

But he thinks the future landscape, in which multi-ties are a near certainty, means that the split model is one that IFAs increasingly will have to take on board.

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