How will you justify your trail in future?

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The time is fast approaching when it will be mandatory to display your commission levels on your website. It’s quite unclear at this stage how most firms will approach this, due to the bewildering number of options available in the market. But display them, you will have to.

Are you likely to get lots of questions about them? My expectation is probably not… but you might get some. The most likely area that you will be asked about is the level of ongoing trail that you charge, as this will apply to clients each year. While you should always be in a position to do this anyway, you now need to be able to justify your trail commission clearly and simply to your clients. So how might you do this?

Well in my book, sending out a 10-page report with a template economic summary and a schedule of current investment and pension values simply won’t cut it on its own. After all, where is the value that you add here? Clients will rightly expect more for the trail commission that is being deducted from their hard-earned funds.

There are also a few “hygiene factors” that clients simply expect these days – these will help you to justify the lowest levels of trail commission, but in reality, no more than that. These include the offer to clients of a review meeting once per year, and regular communications (usually in the form of a client newsletter) that from a distance helps them make better financial decisions and educates them in personal finance matters. Oh, and offering nice coffee to clients too – trust me, it helps!

But if you want to be able to comfortably justify higher levels of trail commission, you need to go a lot further. Yes, clients will want an update on their policies and regular communications etc., but they will expect more if they are paying more. Trail is much easier justified if the client feels and recognises that you are delivering a truly personal experience to them. What might this include?

 

  • Revisit life goals: This is all about the client. Have their circumstances changed and/or have their hopes, dreams and ambitions for the future changed? Are you and the client still looking in the same direction, focused on the same goals and destination to achieve?
  • Revisit cost of goals: How do their changed ambitions and goals affect the plan, if at all? Do they need to spend more, or less? Do they need to save more, or less? Can they retire earlier or is their wealth transfer plan affected? It is so important that you review the impacts of all changes to goals within your client’s future cashflow plan.
  • Demonstrate how their plan is still the right plan: You can give the client comfort that previous decisions still hold true, or they need to be tweaked to reflect changes in the client’s life or in relation to their future ambitions. As you know, doing nothing is very often the optimal strategy.
  • Review choices and assumptions made: Things change, outside of the lives of your client and outside of your control, whether it be in the economy, the personal finance market or the taxation environment etc. Sometimes action is needed, often it is not. Review and restate the choices and assumptions made.
  • Shut out the noise: Deal with your client’s concerns about what they read in the weekend papers or heard in the news that morning. Gently (but firmly) remind them of the long-term planning approach that you have taken together and the folly of them reacting to the news. Remind them of the dangers of attempting market timing, thinking short term and changing their investments based on fads or using the rear-view mirror.
  • Be a leader: This will follow from all of the above. If your client sees you as their voice of reason and valued guiding hand, they will seek out your advice at every turn in relation to their personal finances. And they will recognise that this is a highly valuable service and worth paying for.

 

Do all of these well and you will have no issues in justifying your trail commission. You won’t be looking to hide your commission levels away somewhere on your website, instead you will want to discuss them with your clients, proudly taking the opportunity to demonstrate to them the incredible value you deliver each year.

5 ways to increase your income in 2020

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A new year, a new decade. Most advisers are pretty much flat out, looking after your clients and building a better and more durable business. Growing your business remains front and centre for most of you, so here are five high-level areas that can help you achieve your growth goals. While some of the thoughts are not new, hopefully this piece will act as a reminder of areas that you just should never ignore.

 

1. Attract more customers

This is of course the most obvious way to grow, but often the most difficult as it is influenced by many moving parts; your own activity levels, the quality of your advice proposition and the number of referrals you get from satisfied customers, the consistency and quality of your ongoing client engagement processes, your networking and other client acquisition methods and all of your marketing activities. Having a loyal band of potential introducers (accountants etc.) is a crucial client acquisition element for many successful advisers.

Getting more customers is usually the sum of many activities. If I was pushed and had to pick one that we all can be guilty of not doing enough of? That would be to get out of your office and meet more people. Spending more face-to-face time with prospects and potential clients almost always results in greater numbers of new customers.

 

2. Review your proposition

Getting more customers is great. However this also creates new challenges in terms of minding these customers into the future. What if you could earn more ongoing income without increasing your customer numbers?

This is where your proposition comes in. There is huge benefit in regularly and critically evaluating your advice proposition. Is it strong enough? Are there more valuable services that you could offer, which would allow you charge more? Or are you delivering the right services to your customers, but they are simply not aware of them as a result of poor communication by you? If you can improve your proposition and your clients’ knowledge and engagement with it, can you charge more and comfortably justify doing so?

I suggest you take some time out to review your proposition and how you are communicating it. You may be pleasantly surprised when you actually visualise the depth of services that you offer and the value that you are adding.

 

3. Attract more assets

Financial advisers often tell me of the frustrating situation in which they are only managing a portion of a client’s assets. I just don’t really get this one to be honest… Yes I can understand that a client may think they are better off having a few advisers and not having all of their eggs in one basket. However, isn’t it the adviser’s job to manage the diversification challenge on behalf of the client?

This situation sometimes arises as a result of an adviser being happy to simply get a new client on board, even when they are only getting a portion of the client’s overall assets. But how can you advise the client properly when you are only partially informed? Surely this situation will result in a completely misaligned portfolio? And if you carry out future cashflow planning, this is rendered pretty meaningless if you don’t have full visibility. Even if you don’t manage the assets, you need full information about them.

Work on your script with clients where you know or suspect you are only advising on a portion of their assets. Your client needs to be crystal clear about the disadvantages of you not having full visibility of all assets.

 

4. Cross-selling opportunities are important for you and your clients

Sometimes it’s easier for an adviser to position himself or herself as an investment specialist or a retirement practitioner. But then sometimes as a result, the adviser can be reluctant to step outside of his or her specialist knowledge zone and advise in other important areas such as protection etc.

Yes of course you need to be confident in your capability to provide excellent advice in these other areas, but this is not really a stretch for many advisers. And it does not undermine your positioning as an expert in your main area of specialisation. Clients should expect and will be grateful that you are watching their back in these other critically important areas too.

 

5. Increase your rates

When did you last actually review your advice rates? I see enormous disparity between rates charged (particularly ongoing trail) by different advisers, often when there is little or no difference in their propositions.

Sometimes it’s a case of one adviser having set their rates ten years ago when the country was on it’s knees and not having revised these rates since then, while the other adviser set their rates in recent years when the economy was on a steady growth path. So is it time for you to look again at those rates you are charging – are you selling yourself short for the value that you’re delivering? This starts back though with your proposition – is this good enough to justify higher levels of trail?

 

These are just a few ways in which you can look to increase your income in 2020. The next step is to do some more detailed planning around each of them. The very best of luck.