Research and development is often underestimated with financial and professional services. Indeed, like compliance, it may be viewed as a dull compulsory business strategy. There are those such as the much-quoted Steve Jobs who didn’t necessary believe in research and relied on their intuition as to what consumers want or need.
Yet in an era of transparency and increased regulation, knowing your customer and their priorities, risk appetite, objectives and needs is now more important than ever before.
In their latest thematic review TR16/1 Assessing Suitability: Research and due diligence of products and services, the FCA looked at the capability of adviser firms to research and apply due diligence to assess the nature of the recommended investments, any risks and benefits involved and whether the products sold are appropriate for the client’s assets.
Their findings that firms who placed their clients truly at the centre of the business were the ones that showcased positive outcomes for advice suitability and product appropriateness meant that they were able to apply strategic insight into their service propositions. This is so important where up and coming regulation such as MiFID II is concerned.
Essentially it is those firms who can challenge themselves by applying a rigorous test to their propositions who will showcase a constructive development culture. This can be done through:
- Segmenting clients according to their financial and behavioural needs
- Ensuring a holistic approach in reviewing and researching current platform/fund management providers to ensure they continue to offer suitable products and services
- Applying a client first strategy to avoid inertia and status quo bias to existing platforms/fund managers and stopping a preference for the service received from the provider over that given to clients
- Surveying clients regularly to assess their opinion and needs against services rendered
- Ensuring back office technology and enabler tools such as risk assessment and cash flow modelling are relationship focused i.e. account for the client behaviours (propensities and sensitivities) to fees, their life goal planning and capacity for loss for example.
Whilst Steve Job’s talent for understanding what clients want before they themselves knew what they wanted was unique and highly lucrative, in professional and financial services we live in a different world of validation and informed consent. This means research and development is now a key component of the professional and strategic business development planning process, not to be consigned to a compliance tick box exercise, but placed at the very centre of business development.
