Big adviser firms outsource investment because they can’t control it themselves. Small firms will disappear because they can’t handle investment. I’ve heard both propositions within a few sentences. Eh?
I’ve said before I don’t believe the RDR spells the end of the small adviser firm. On the contrary, advances in technology mean small firms can access sophisticated investments, whizzbang back office and CRM systems and all sorts of planning tools that just weren’t available even a few years ago. With good back office and CRM systems, most compliance checking can be done remotely, which makes it more affordable.
So I don’t buy the notion that the future belongs to 400-pound gorillas. I prefer the notion of the adviser guerrilla, since it is the flexibility and adaptability of advisers that has kept the UK at the forefront of independent adviser developments. I struggle to recall any worthwhile innovation coming from national adviser firms, though I am sure they have developed sophisticated compliance controls.
Memorable and effective advertising (I except the memorable ‘pea-pod’ national press adverts for the launch of the Burns-Anderson Independent Network in the late 1980s), branding, service propositions? Fleet-footed guerillas have been a lot better at that than flat-footed gorillas.
The future of advice is about service propositions and their delivery. I don’t believe there are great advantages of scale. Big firms always end up creating their own systems, which end up being more expensive and inflexible than off-the-shelf software available on the open market. And if face to face contact is a vital part of the service, your advisers need to be near their clients.
Good advisers enjoy spending time with clients and working out solutions to problems. Nowadays, they often do the second bit in teams or with paraplanners. That’s a good development that follows professional practice elsewhere. With the proliferation of online planning tools, demonstrating that you are smarter than a set of algorithms is a challenge for all advisers, but the key advantage the intelligent adviser has is that he fully understands the route to the solution and can explain it in simple terms to the client.
So my view of the added value in the adviser proposition is that it comes first from the intelligence of the analyisis and recommendations, second from the face to face contact and third from the investment content. A lot of the current talk about investment is reminiscent of tiresome product discussions of the 1990s and seems ever more retro. It’s not about products, guys!
The added value for the adviser comes from honing the proposition and making its delivery as efficient as possible. For larger firms, that will often mean throwing baby out with bathwater in order to ensure everyone stays on the tramlines, which is why most of them – and the networks – will be restricted.
Restricted firms say how little is different, but the problem is that while the mass of your clients form an average, many individual clients aren’t average and if you take the full financial planning process seriously, there are often points at which an adviser ought to consider deviating from the restricted solution.
Despite pious claims to the contrary, there will be commercial pressures for restricted advisers to cram the client into the box. Chartered and restricted? I don’t think so.
Chris Gilchrist is director of FiveWays Financial Planning, edits the IRS Report newsletter and is the author of the Taxbriefs Guide, The Process of Financial Planning