Have the right cost model in place

/in

As an important element of the research completed for Brokers Ireland on “The Evolution of the Broker Market 2030”, we identified 12 areas to be considered by Financial Brokers to help prepare your business for the changing market environment.

We have considered previously the importance of developing the best proposition and services for different groups of clients and prospects. We now consider the next action identified in the research, which focuses on developing a cost model that makes sense for both the client and also for your Financial Broker business.

This starts with recognising that being a Financial Broker is a very worthy profession that delivers a lot of value to clients. Good Financial Brokers deserve to be well rewarded for the value that they add, helping clients to achieve their financial objectives and transforming their lives.

To achieve this, a well-thought-out remuneration model that is linked closely to the value added must be developed and articulated clearly to clients. This may appear difficult to some, who have simply been ‘price takers’ in the past.

While there is a sense that fixed fees may be charged for project-type work such as some complex planning services, there is a strong and unanimous belief among all Irish participants in this research project that the current commission model, particularly in relation to ongoing charging on an assets under management (AUM) basis, works efficiently and will continue.

With regard to explaining the level of charging, Brokers will need to be able to clearly demonstrate and confidently articulate the value delivered. In the future, it would be prudent to anticipate that trail commission won’t continue without value actually being delivered.

There is an expectation in some quarters that enterprise level charging structures (irrespective of where business is placed) will emerge. In this case, Financial Brokers will need to set their own pricing for different products, and not vary this based on terms given by different providers. Additional benefits supplied by a provider would then go to the client.

Charging for younger clients and those of limited asset amounts is recognised as a real challenge for the industry. They are not attractive to either providers or Brokers today, but they are the valuable customers of the future. The belief is that many Financial Brokers will take a long-term view that as these people’s careers progress and their assets build, in time they will become attractive clients. For clients with low assets, Brokers will need to continue to receive initial remuneration to make this business worthwhile, either by commission or through the levying of some form of an administration fee. As discussed earlier, the service level provided to these clients will need to be relatively light, in line with the income generated for the Financial Broker.

So, what are the steps for you to take to develop a cost model that will serve you well into the future?

The starting point is to review your current remuneration levels across your different client segments, ensuring that they are fair and equitable to your different groups of clients, and to you. Your next action is to take a step back and identify all the areas of value that you deliver, and then place a cost on these based on your time, expertise and the value experienced. This may require you to adjust your remuneration amounts accordingly.

Running in parallel with these actions, we also think it prudent to actively consider an alternative remuneration approach for younger / lower value clients, to ensure that they are not loss-making for you, while also delivering positive outcomes for the clients. Your cost model needs to be proportionate and attractive enough for these clients, while also making sense for your business.

Finally as you look forward out over the 8-10 years and should enterprise level charging begin to emerge in the future, it might be worth considering the levels of charge that you would apply to remove any suggestion of provider bias in your recommendations.

Fees and charges are always a tricky area to get right. The solutions you develop must be transparent and fair to your clients, while also providing the level of income required by your business to ensure you can afford to continue to deliver a world class service to your clients.

 

6 Apps that make my working life much easier

/in

Every summer I give one of these articles over to the subject of apps that I use regularly. This year I’ve zoned in on 6 apps that I use very regularly, in some cases many times each day. I’ve ignored meeting apps such as Zoom or MS Teams as these are used by everyone today.

 

App 1: ChatGPT

So where do we start with this one? As Artificial Intelligence (AI) is heralded as the greatest technological revolution in decades and about to change how we live and work beyond our comprehension, ChatGPT is the poster child for AI – certainly at the moment. It has grabbed most of the headlines as it is so simple to get started with, enabling many people to harness the power of AI. However, to use it well and to its full potential is another matter altogether…

I’m finding myself using it for a wider range of functions now – whether that’s in carrying out research, as an alternative search platform to Google and as an assistant in content development. However I know I’m still only tipping around the edges of it. I’m beginning to see how it can help in a much broader range of business tasks – and this applies equally to the work that financial advisers carry out every day. The power of ChatGPT and AI more broadly is quite mind-blowing.

I’m also wondering though about when I write a similar article in a year’s time. Will ChatGPT be the headline on the list or will it be “old hat” at that stage?

 

App 2: Xero

I was introduced to Xero, an online accounting system a couple of years ago. It has had a transformational effect on the financial management side of my business. I have real-time profit & loss statements, balance sheet and a host of other useful reports that are available at the press of a button. All my invoicing and bank reconciliations are done through Xero. My accountant and I can both view the up to the minute real time information about my business, I’m saving hours every month with this software and have much better information available to me.

Specifically with the app, a great overview of business bank accounts, invoices and purchases is provided. I’ve full view of my outstanding invoices in the App and other important information. I now have all the information I need, and the time spent on “the books” is a fraction of what it once was.

 

App 3: Ayoa

For any of you that I’ve been fortunate to develop strategies and plans with, you’ll have seen this one in action. Ayoa is the replacement for iMindmap, which was the business established by the king of mindmaps, Tony Buzan. I use this all the time when brainstorming, whether on my own or with clients as part of the planning process. Because of the highly visual nature of them, mindmaps are far more effective to capture ideas than using a flipchart, as you can easily edit items, move them around, expand ideas or simply lose the weak ones. You then also have a digital record of the work which can be shared with others or can be exported into other programmes for further use. I’d struggle to cope without this one!

 

App 4: Canva

While I don’t use this app every day, it is really handy from time to time. It is effectively a DIY design tool. While it will never replace the skills of a good graphic designer, it is very useful for those simple design jobs where you just want to create or manipulate a nice image for use maybe in a social media post. It’s definitely one worth checking out.

 

App 5: Feedly

An old favourite that I know some of you now use. Feedly is an app that I use all of the time in seeking out useful content from the web to share, and indeed for content ideas to write about. It enables me to track blogs / news feeds that provide content I don’t want to miss. Rather than receiving an email every time there’s a new blog post or news article,  instead the new content is sent to Feedly which gathers all of these articles in one place. It is like a magazine rack for online articles, waiting for me to go through them.

I can then flick down through hundreds of articles in minutes, reading only the headlines, dipping into an introduction or indeed the full article if I think it is actually worth reading. And I can mark them all as “Read” very easily as I go along, ensuring those particular articles don’t appear again. I’ve categorised the different feeds into groups, which further speeds up the process too. The benefit of Feedly is the time it saves me in getting through huge numbers of articles.

 

App 6: Pocket

And then there’s Pocket, which I see as my sister App to Feedly – another old favourite. This is my scrapbook of articles that I’ve “cut out” and saved for later. As I see articles of interest on the web or that come through to Feedly, some catch my attention to be read later when I’ve a bit more time on my hands. With 2 clicks, I put them in my Pocket and can also tag the articles for different purposes – it might be to share out later, to rewrite with my perspective, maybe to help me develop a new angle for my proposition etc.

I can then go back into Pocket when I want to carry out an activity and simply click on the article that I’ve saved for that very purpose. It’s all very easy and it means you don’t lose great articles that you’ve read.

 

I hope there’s an app here for you to make your life a bit easier or more productive.