The recent Retail Distribution Review Interim Report sets out a compelling argument for the segmentation of advice and sales in the financial services sector.
Some commentators are already suggesting that such segmentation is not in the interests of consumers and that certain sectors will be “disenfranchised”.
We have operated such an approach for the past four years and can confidently confirm that this is exactly what clients want.
But how exactly have we gone about delivering what the client wants?
For us it means we have “unbundled” the provision of advice and implementation services using a robust process we refer to as EAIR.
This stands for Engagement, Advice, Implementation and Review. It succinctly explains to our client exactly what it is we are doing for them.
We do not charge for the engagement part of the process. This involves the “know your customer” and client identification process as well as a first face to face meeting without cost or obligation.
We do expect clients to provide a completed fact find and attitude to risk questionnaire ahead of that meeting and in our experience clients do this rather well.
It means that at the first meeting we can concentrate on client needs and wants rather than basic data gathering.
Our advice process results in the preparation and presentation of a detailed report in plain English to the client representing a valuable written record of the advice we provide. The advice is not dependent on the client purchasing any financial product.
A project fee, rather than a moving amount of hourly rate is charged so that the client knows the exact cost of the service in advance. Our experience makes a lie of the often stated “clients won’t pay fees for financial advice” Yes, they will!!
If the client needs to implement a financial product they can do so with us, through another firm or indeed on-line. Often advice does not result in the need for a new product. We have effectively de-coupled advice from implementation, and proven that there is a demand for this. Interestingly this demand is at all levels and not confined to the so called high net worth clients.
Review services for those who need it are as formal as our advice reports. They are supported by quarterly valuations and email or hard copy newsletters as well as access to information and advice by phone or email. This enables us to build a long term relationship with those clients who need it.
A big part of our evolution has been Chartered Financial Planner status which enables us to distinguish ourselves from the sales based offering; still so prevalent in the financial services sector. We have become the epitome of “anti-sales” and advocates of the delivery of advice and service.
We have by no means finished the evolution of our business model. Our mantra is that whilst we believe we are very good at what we do we can always get better. This means that we do not rest on our laurels and constantly strive to adjust our offering to meet our client’s needs.
In light of the latest RDR interim report I wonder how other IFA firms will be addressing some of the points I have described in this blog.
What is clear is that there is a no single business model that is perfect for the whole IFA market. The way we do things probably differs from the vast majority of other firms. That is not to say it is better or worse than others, just different.
It is these differences that make the IFA community such a vibrant place. Hopefully one outcome of the RDR will not be the abolition of what makes us all so different.
Martin Bamford is joint managing director at Informed ChoiceIFAonline
Joined as head of strategy, multi asset, in June
Group income protection
Nine in 10 do not have income protection
Set to become part of Single Financial Guidance Body