With any industry professionalisation there has been ducking and diving and head in the sand mentality such as the overreliance on past practices such as ‘Commission style’ ad valorem charging, slow movement of providers adoption for clean share classes, transactional client servicing from solicitors and accountants and the overall adviser malaise around the 2016 sunset clause on commission-legacy business books.
Yet from the conversations I had it was clear many are now spotting the trends and avoiding the fads and are now beginning to showcase real strength in their business models and offer high value for their customers.
Where adviser firms are concerned, there are some models that now not only offer independent or restricted advice, but also are keen to discuss the possibilities for focused and simplified advice models blending in technology to streamline the advice process and make it highly accessible, relevant and yes suitable to meet client needs.
In their papers TR14/10 and GC14/3 the FCA were clear in their desire to remove barriers to access for advice, with technology playing a key role. In this regard we presented it’s those adviser firms who make cashflow tools THE process not just part of the process that will catch onto the trend towards holistic advice tailored to client requirements.
Client segmentation has always started with assets and demographics, but the trends are now with the relational and holistic strategies that demand firm knowledge on what type of relationship clients want from their providers or adviser firms. This requires taking a forward view on client cashflow and calculating future expected fees minus the costs of servicing clients, which will then give a strategic lifetime client value. Once calculated then the client loyalty or retention rate needs to be factored in and when applied to the strategic lifetime value will show how reliable and stable this client segment is.
This segmentation strategy can remove risk around an over reliance on ‘commission style’ adviser charging, the afore mentioned ad-valorem or example. With high client retention or loyalty factored in, clients see value in services offered and would be willing to pay retention, task based, or hourly fees. This can also aid suitability for outsourced professional portfolio services and justify the Centralised Investment Proposition whether it’s passive, active or a mix and solve any issues surrounding the commission ‘sunset clause’ where only suitable clients will be accepted.
You can also see another trend here: it’s those adviser firms who adopt a holistic approach to clients needs and evolve into a direct and transparent charging model that will be attractive to the growing number of law firms which are establishing formal associations with advisers.
Indeed SIFA members are being encouraged to entertain joint ventures or partnerships with adviser firms and solicitors. Due to the Solicitors Regulatory Authority (SRA) 2012 announcement that it was minded to cease authorising firms that were regulated by the FCA and the fact that solicitors are now required to go beyond the transactional ‘know your client’ and cover all tangential issues that arise out of legal advice means they can learn from the comprehensive client work adviser firms now conduct.
This with the new pension rules and the Care Act means opportunities abound to offer a synchronised holistic service so clients can make sense of the sometimes nonsensical information provided. Adviser firms then need to apply broad framing to their board decision-making and management information collation and consider innovative and new ways of strengthening their service propositions.
With the overall market trends to buying distribution, there needs to be a cultural focus for due diligence, one which demands acknowledgement of the move to holistic strategy and practice. Without this then the risk is the consolidators will have a transactional model built on short-term goals.
So overall a big Facebook ‘Like’ to the continued blending for financial and professional services business practices. Well done SIFA.