I recently passed the 8th anniversary of leaving corporate life and setting up StepChange, with the aim of helping financial advisers to grow their businesses and to build durable, long-term value in them. So what’s changed in the last eight years?
The market is fundamentally different today
Eight years ago, the term financial planner didn’t exist. Then it became a fashionable title for people to use. But today it perfectly describes what so many within the advice community do every day. So many firms have actively shifted their business model from one centred on product sales, to one where the financial plan developed by the planner sits at the core of the client proposition. And this has resulted in a whole new breed of advisers; those who are adding significant value to their clients and are now confidently in control of their business, not dependant on product sales and not exposed to the whims of the market and the changes in product strategies by providers.
Less clients being brilliantly served
Eight years ago, the most common question I was asked was, “How do I get more clients?” I’m rarely asked this today, in fact on balance I’m actually asked the opposite more frequently! The aim of many advisers today is to deal with less clients and to serve them brilliantly. The challenge is in the last bit, and that is where we are helping firms every day, helping firms develop excellent and valued client retention strategies as opposed to the race for new business.
Investor behaviour rather than investment expertise
A big change over the last 8 years has been the approach to investments by advisers. Back then lots of advisers worried about selecting the best investment for clients, beating benchmarks and worrying whenever performance dipped. You spent your life tweaking asset allocations and fund choices for that extra ounce of performance, that more often than not evaded you and your clients.
Today I see advisers focused on getting the right portfolio in place for their client and then spending their time focused on stopping the client from blowing it up through their constant meddling! Some of the even more forward-thinking advisers are formally recognising where they add value, don’t see themselves as investment specialists or don’t want to potentially damage client relationships through poor advice, and as a result are outsourcing the investment expertise to 3rd parties.
Technology is critical…but not everything
It’s funny, how do you feel about robo advisers now? According to some “experts” 8 years ago, they were going to herald the death of financial advisers… Excellent financial planning requires deep, trusted relationships built upon meaningful and highly personal conversations. Yes, a machine can hugely help to improve part of an adviser’s value chain, but it hasn’t as yet replaced this most critical piece of the relationship…and I say it never will.
But technology also plays an enormous role today. What would your financial planning proposition look like today without future cashflow planning? Many of you I know would say that it wouldn’t exist.
Having a clear target market makes your life so easy
If you can easily identify and reach your target market, you can then focus your client value proposition, your sales activities, your marketing messages and indeed your whole support infrastructure around meeting the needs of these specific groups. Some only see the risks involved in this – narrow groups of people to target, missing broader opportunities etc. As a result, some advisers continue to try to appeal to everyone. And as a result, they don’t really connect with anyone. Yes, your target market must be big enough to sustain you. But if you then focus your efforts on them, you gain the opportunity of creating a real standout positioning for yourself.
Pricing and justifying your charge are still big challenges
One of the most common questions I’m asked are still about charging. However, the conversation has definitely moved on a bit. Many of you are happy with what you are charging clients – often but not always being paid by a provider or platform. The change though is that lots of you are now equally focused on how to justify your charges to clients. As long-term value is being built up in your business, you recognise that this value is only locked in for as long as you retain your clients. To do this, you must be able to justify what you charge. And this is one of the main areas where advisers seek us out – helping them to build their propositions to a point where they can clearly and confidently communicate what they charge, with little risk of losing the client in the process.
So, eight years on, what has changed? I see a far more confident, professional advice sector that is clear about the value that you add. You recognise your role is as a mentor or a guide to your clients, helping them plan their future and achieve their goals. It’s funny; while you work in financial services, the money is only one part of your focus today.