The industry has come a long way since the days of the 'people don't just buy life insurance - it ha...
The industry has come a long way since the days of the 'people don't just buy life insurance - it has to be sold' era, before the Financial Services Act was introduced. At the time it seemed life offices would offer agencies to anyone who could generate a steady flow of business for them.
Nowadays the emphasis has changed; the focus is much more on the advisory aspect of the role and much less on 'salesmanship'. Banks and direct distributors have increasingly taken the lower and middle ground while IFAs tend to operate at the top end of the market, dealing with more sophisticated investors whose needs may be more complex and who are likely to value the services that can be provided.
The age of the consumer has led to public awareness of commission levels available to advisors and has driven down remuneration levels as clients have sought to share commission or demand to pay for the work on a fee basis.
In the investment markets there has been increasing emphasis on trail commission which continues unabated.
This is an environment in which the fee-based IFA can thrive and explains, at least in part, why the number of registered IFAs has started to rise after almost a decade in decline.
Many fee-based advisers work within accountancy or legal practices. It is not only the global accountants who have sought to build up financial services practices.
In many cases national and regional professional practices have come under pressure to generate new revenue streams, choosing to focus on a particular sector of the market such as small businesses or private clients and to extend the range of services offered to include fund management or financial advice.
To a solicitor or an accountant, the clear benefit is the possibility of generating more revenue from each client and retaining more client control.
To the practice-based IFAs it reduces or eliminates the need for prospecting and enables them to charge time-based or fixed fees to a client who is already used to this method of payment and values the practice's services.
The in-house IFA was initially registered through the recognised professional body, however direct registration of fund managers or IFAs has ensured it is no longer the province of the part time accountant or solicitor. A practice-based IFAs is recognised as the professional he or she is.
Clients appear to be seeking the following characteristics in a fee-based adviser.
It is often said there is no substitution for experience. It is usually recommended that a minimum of three years' advisory experience (with at least two years as an IFA) is required. This is one profession where experience is valued.
While some clients have been known to request an age limit at below 40 it is always advisable that no age parameter (the average IFA is 54) is set. While younger IFA's may be better qualified on paper and more willing to adapt and embrace a fee basis, in practice, when presented with a shortlist of qualified candidates, clients tend to choose experience over youth on almost every occasion.
It stands to reason when operating at the high net accounts end of the market, often as a subsidiary of a professional practice, that good qualifications are a prerequisite. AFPC including G60 tends to be the norm although accountants often welcome APMI or progress towards it. Increasingly a Certified Financial Planner qualification is becoming recognised as a demonstration of a rounded technical expertise and quality.
In any service industry, first impressions count. Fee-based advisers operating in a professional practice are expected to fit in with the culture of the firm in which they work.
In large cities it is generally assumed that partners in accountants and solicitors dress very conservatively however many senior partners in market towns dress flamboyantly. It is important to remember that the partners need to believe clients will feel comfortable with the adviser and thus ensure quick rapport and trust is built. This is always the most difficult criterion to meet. Even though the industry is moving towards more fee-based advice, very few broking IFAs have experience of working fully on a time-costed basis.
Advisers who have made the transition often say this is the biggest difference from their previous role. When fees of £120 to £250 per hour are charged, the long lunch or corporate entertainment event suddenly has greater significance as does the whole time cost basis of billing clients. Clearly there will be much less prospecting time required than in a traditional role but even top lawyers cannot charge out 100% of their time.
As well as the obvious measures of persistency and upheld complaints, most hiring authorities will seek examples of client reports as this gives guidance on the quality of advice given and the type of client the adviser is used to working with. Increasing a wide-ranging technical assessment is used as a part of the recruitment process.
Salaries are usually a reflection of the hourly rate charged with basic earnings ranging from £30 000 to £50,000 plus the appropriate level of benefits, including car or car allowance, annual salary increments and often a team-based bonus.
This is a fast growing sector of the market and for many the main attractions may be at the ground floor of an embryonic business. In some ways good fee-based IFA practices working with professional practices are the dot.coms of the financial services industry.
Future income stream potential is immense, non-indemnity, trail commission and management fees create embedded value in the business as they focus on companies and high net worth individuals who will increasingly value their services. `
In the case of some of the large professional firms we are already seeing the head of financial services taking their places at the table alongside solicitors and accountants as
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