5 myths about financial planning businesses

I’m finding that more and more of my time is being spent helping advice firms reposition themselves as true financial planning businesses in the eyes of their clients. It’s extremely interesting work, as it always results in the adviser taking a really deep look at their business, as we carefully then figure out how the business will look differently in the future, and the steps that need to be taken to get there.


I’ve noticed as I’m doing this work that there are a number of myths that seem to crop up regularly and make the change quite daunting, that need to be gently taken apart and pretty much discarded! So here goes with the 5 myths that raise their heads most frequently.



Myth #1: My biggest challenge is how much to charge

This pricing challenge is where the conversation between the adviser and me often begins, along the lines of, “I know what I want to do going forwards, but I just don’t know how much to charge and if I can get this piece right, I’m grand!” You actually have a far bigger challenge in identifying how and where you add lots of value to your clients, and then being able to communicate this effectively and in an engaging way. The prize though for doing this work is that when you are crystal clear on the value that you’re providing, and you can get this across to your clients, you suddenly get a new-found confidence in the whole area of pricing, which then pretty much falls into place – trust me!



Myth #2: Commission is bad, fees are good

Now this is certainly not going to be a strident defence of commission. Because in my eyes, that simply is not needed. Commission is a method of payment that can and should be used to remunerate an adviser for the advice that they give. As are fees – an alternative method of payment. Both commission and fees have their advantages and their drawbacks. They both have their place, each suiting different scenarios.


Where commission has earned itself a bad name in the past is around the (lack of) transparency with it. This has been addressed somewhat with commission disclosure and indeed more recent regulations. But when you think about it, this is more an issue of adviser behaviour that a flaw in the payment system. When you are completely transparent with your client about the level of commission you are earning on products, it is an effective means of being remunerated.



Myth #3: Niches are not a viable strategy

I’m not a financial planner but I think I can talk from experience on this one… When I set up on my own and told friends and colleagues that my business was going to be aimed solely at financial advice firms, I was told I needed my head examined! “Having a target market of only about 1500 firms is just too small” (no it’s not) and “advisers won’t pay for outsourced services” (oh yes they do) were probably the 2 most common refrains.


Niche strategies bring challenges in being able to demonstrate expertise in your chosen niche and you also need to be able to reach your chosen market. But they also make life very easy… Imagine if I was trying to write this article to appeal to financial advises…. and accountants, lawyers, shopkeepers and rock stars! Suddenly it becomes very difficult to actually demonstrate your engagement with their specific issues. So if you have a specific customer / market expertise or a product area advantage, it may well be a viable strategy to become the kingpin in that market segment. Don’t rule it out!



Myth #4: There’s still a strong future for product-led advice

A bit of a tricky one, because there probably IS still a future for product-led advice. But it’s likely to become a steeper and steeper climb in the future. The winds of change just don’t auger well for advisers who position themselves as “product solvers” rather than providing comprehensive financial planning and advice.


It is very hard to demonstrate real value when simply picking a product or fund etc., you are always at the mercy of new competitors seriously disrupting the pitch (think Vanguard in the USA & UK) and it’s very hard to build long-term trusted relationships based on product picking alone. Technology has the potential to significantly disrupt product-led advice and your price will be constantly under pressure from commission transparency (a good thing!) and possibly future regulation. So while there may be some road left for advisers whose business model revolves solely around product selling, I think it’s likely to be a tough road.



Myth #5: It’s too hard to change direction

Well the proof is in the pudding! We only have to look around and see the financial advice firms that have completely reinvented themselves in all four corners of Ireland. There are many firms who have worked extremely hard on building their proposition, have developed a multi-channel range of tools to communicate this proposition in a comprehensive and engaging way and are now reaping the rewards of stronger client relationships and higher income streams that they can more easily seek and justify.


Yes the work takes structure and focus, and requires thoughtful analysis of your own capabilities, market opportunities and client segments. But when done well, this work is also hugely rewarding and insightful. And this in turn leaves you with a business that you are extremely proud of and re-invigorated to reap the full potential of your hard work.


So if you’re transitioning your business to a full lifestyle financial planning business, don’t believe the myths and instead continue to work on building that future-proofed business that you want.