An over-simplistic approach when considering a Wrap strategy for your firm could mean a more diffi...
An over-simplistic approach when considering a Wrap strategy for your firm could mean a more difficult and less rewarding transition – but clear and precise thinking will pay big dividends.
If you are thinking of making the move to a fee-based business model built around a Wrap strategy, you will undoubtedly take your total ‘Assets Under Advice’ (AUA), along with your headcount of advisers, as an important yardstick for judging the viability of the change for your firm.
You will be right to do so, but only with two essential provisos, so closely related that they often amount to the same thing. The first, which is self-explanatory, is that AUA should not be the only yardstick you use. The second is that you must be absolutely clear about what you mean by ‘AUA’ in the context of a Wrap strategy.AUA, FUM, AUD…?
One reason why the latter can prove so difficult for many Principals is the plethora of names used throughout the industry as the measure of a business – AUA, Funds Under Management (FUM), Assets Under Direction (AUD), Client Records, and others, are all used interchangeably, as if they mean exactly the same thing. In fact, they often mean different things to different people – and very different things to those in different tiers of the same practice.
In our experience, a Principal’s idea of AUA is often no more than the bare numbers shown in Client Records – the ‘balance sheet approach’. But, to regard those numbers as relevant AUA in the context of Wrap is like calling a name from the telephone directory a ‘sales lead’.
However, AUA means something very different to those directly involved in advising clients. The AUA that will influence their thoughts, should they decide to hand-pick some of your clients and start fee-based practices of their own, will be qualified by their knowledge of the individual clients and the aspirations, objectives, needs and attitudes that mark them out for a Wrap-based service.You need to take everyone with you
The decision to embark on a Wrap strategy needs to be based on a thorough knowledge of your clientele, plus a clear and common view of your firm’s values, goals and aspirations, together with an understanding of what its internal culture should be for long-term success.
This is not ‘touchy-feely’ New Ageism but practical management in today’s market – and tomorrow’s. Wrap allows you to take a holistic approach not only to your clients’ needs, but also to the demands of your business.
For the long-term good of the business, you will need to consider the needs and aspirations of all stakeholders by providing long-term internal career paths and opportunities for Advisers at the client interface. When an Adviser’s worth ceases to be the sales they might make next week, and becomes the valuable client relationships that they control today, they cannot be seen simply as ‘hired help’ and their aspirations ignored.It will pay dividends
This mission critical work is demanding, and may mean considerable soul-searching and upheaval for some firms. But it will pay dividends, whatever your decision regarding the move to a Wrap strategy. The Principals of a practice that adopts the Wrap route will be able to go forward in the knowledge that their firm is fully fit for purpose in the whole of market environment. What is more, they will have their staff behind them, create permanence and a realisable value in their business – and be able to plan for a profitable succession when they wish to retire.
For the Wrap-remodelled IFA firm, the ‘whole of market’ approach is key – whole of market choice on tax wrapper, fund choice, remuneration. And the flexibility to advise clients through every kind of liquidity event – from bonuses and house sales to inheritances and lottery wins – will encourage a continuity that will see the ‘family IFA’ a real possibility.
As to the choice of platform: transparency, transparency, transparency. If it isn’t absolute, then ‘whole of market’ cannot mean what it says.
Avoids paperwork with two-step process
Investment process will use machines
Mark Sterling accused of operating a collective investment scheme without authorisation
'Increasing engagement will only favour those prepared to put in the effort'