Ian Jarvis, managing director of Prestatyn-based Bateman Jarvis, reveals how he transformed his business in time for the biggest change to financial services in a decade.
We started our Retail Distribution Journey (RDR) journey in April 2008; the financial crisis had hit, markets were having a torrid time and we were dealing with a great number of queries from clients regarding their investments and pensions.
Although each client had their own questions and concerns, on further questioning we realised that clients wanted to receive more information, more frequently and, as a small firm, we needed to find an efficient way for us to deliver this to a broad range of clients.
I then had discussions with a sample of our clients, covering all the types on our books. The responses confirmed that, irrespective of the value of clients investments, they all had five things in common. ( see box below).
My RDR journey: five years of struggle
Knowing what clients now expected and considering the FSA’s examination requirements, we took the bold decision to ignore the examination requirements until such time as we were comfortable with our service propositions and our charging structures.
Our first step was to carry out detailed research of wraps, platforms, risk targeted funds, risk profiling tools, their associated asset allocations tools and financial software which would enable us to put together a range of services for different types of client.
Having determined what we felt was the most appropriate range of tools; we then broke down our advice proposition into four categories (see box below).
Initially, in November 2008 we launched a range of 48 risk targeted model portfolios, 38 of which fell under our Premium service proposition and 10 of which fell under our Low cost service proposition, all under our trademarked OPUS Portfolios banner.
We soon realised that this simply wasn’t a wide enough range; we had failed to take any account of clients seeking real income. So, in January 2009, we launched a further 12 income portfolios.
The next three years were spent discussing each of the service propositions and investment processes with clients and, where appropriate, incorporating them into our new systems.
We also spent a great deal of time writing detailed client guides, redesigning our client questionnaires (it’s becoming more important to listen to what clients want, expect and require) and fine tuning our review documentation.
Finally we launched a website specifically for clients who prefer electronic communication.
Having ensured that we had a viable business proposition for the post RDR world, I then set about taking the CII examination route with the aim of ensuring that I had no gap-filling to complete. The appropriate examinations were taken and passed (see, I knew it would be easy) and I received my SPS in March 2012, just in time for a client to suggest that there was a gap in our service offering!
He wasn’t keen on active funds, but realised the benefit of regular asset allocation reviews, particularly when combined with rebalancing to the current model in times of market volatility.
He’d worked out that moving out of equities when markets were up and back into them when markets had fallen, made perfect sense. He effectively wanted to use a risk targeted portfolio of passive funds, but receive quarterly reviews.
So, it was back to the drawing board, more documentation was produced, a new service proposition was designed and an additional investment process devised; and we launched our Low cost Plus proposition. This sits neatly between our Low Cost a Premium propositions and is costed accordingly.
So there we have it, almost five years of work culmination in: five service propositions – all costed accordingly; three distinct centralised investment propositions incorporating 60 risk-targeted model portfolios, the required examinations to keep the FSA happy and the required SPS.
Unfortunately, if you haven’t done all of the above already – panic, you’ve left it too late!
For us, business on the 2 January will be the same as business on the 21 December.
Bateman Jarvis has broken its advice proposition down into five categories:
Transactional – designed for those wanting one-off advice (and not suitable for investment/pension clients)
Low cost – designed for those clients wanting ongoing advice at a low cost; predominantly those with smaller fund value or those who don’t believe in active fund management. Here we use passive funds and provide an annual review of asset allocation and the underlying funds.
Low cost plus- added after the original four categories in response to a client who wanted to use a risk-targeted portfolio of passive funds, but receive quarterly reviews.
Premium – designed for those clients who believe that active funds can be worth paying for. Here we research approximately 3,000 every quarter resulting in a mix of passive and active funds, provide a tactical asset allocation overlay and tailor the portfolios for each tax wrapper.
Bespoke – designed for clients for whom none of our three distinct centralised investment propositions are suitable.
Five things Bateman Jarvis clients have in common:
They dealt with us because they felt they either couldn’t or don’t want to deal with their own financial planning and investments decisions
They preferred risk targeting of investments over historic risk scores
They expected us to carry out regular reviews of the underlying investment funds
They expected to pay us for our ongoing reviews
They fell very firmly in either the ‘active’ or ‘passive’ camp
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