Your product expertise is a crucial skill

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You sometimes might get a sense from some quarters that the only skilled work of a Financial Broker is in financial planning, and that the product side of your customer relationship is, well the ugly side of it… This is flawed thinking. Yes, financial planning is an important and valuable skill, but implementing the optimal product suite is also a critical element of the value chain of a Financial Broker.

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 now consider the fifth action identified, which highlights the importance of maintaining and building your product expertise.

At the end of the day, product advice and implementing product solutions will always be a very important component of the work carried out by Financial Brokers. Planning and guidance will only get clients so far; products are the vehicles that enable those plans to be implemented. If we go back a decade or so, products were pretty much the central element of client engagement. Looking forward though, the product piece will be just one component, albeit a critical element of an overall proposition. The challenge though is that clients place diminishing value on the product selection process, and so for Financial Brokers to deliver valued services, the planning and guidance elements must be delivered too.

In carrying out our research and interviews, we noted several product trends that will potentially emerge over the next decade. These are captured below. Financial Brokers need to consider if or how these will impact their business and what steps need to be taken to mitigate any negative effects.

Pensions and Investments

The pensions market in Ireland seems to go through constant change. As we look back over the last year, we only have to consider the impact of the effective withdrawal of Executive Pension Plans and the emergence of the PRSA as a contract of choice.

Also, after many false starts, auto-enrolment finally looks like it will happen… possibly in the next year or two? It is difficult at this point to see the role Financial Brokers will play in this market, as a viable advice proposition under the proposed charging structures does not look possible.

One of the trends most frequently mentioned in interviews during the research phase is the likely proliferation of centralised investment propositions within Financial Broker businesses. Managing the money and making investment decisions will be outsourced, with Financial Brokers no longer feeling the need to position themselves as investment gurus. This shift will also remove a lot of risk from businesses.

The interest in and application of sustainable investing solutions is currently becoming much more mainstream, and this is likely only to grow. While regulation is a driver of sustainable investing solutions today, the expectation is that as climate change and other forces become more urgent, client demand for sustainable solutions will increase.

Blockchain technology will probably also become more mainstream and Financial Brokers will need at a minimum to fully understand it. It is already visible in some areas today,[1] and while Financial Brokers may never recommend cryptocurrencies to clients, they need to fully understand how they work and be able to discuss them intelligently with clients.

Protection

Protection is an area of future growth for Financial Brokers, whose market share is currently around the 60% mark, significantly below the broker share of the pensions and investment markets. Making the process easier with technology will be a key deliverable here, with product providers likely playing an important role here. For a digital savvy consumer unused to the financial services space, the process of arranging a protection product is time-consuming, cumbersome, and tedious. An improved digital experience will be to the benefit of consumers, Brokers and providers alike.

Mortgages

Having had a market share of less than 10% after the financial crash, the market share for Brokers today is back up at 52%. This is a recognition of the benefits of engaging a Broker in the mortgage process, and a result of new lenders looking to achieve quality and scalable distribution. Brokers that offer a streamlined and efficient process will be able to continue to build a strong transaction-based income stream into the future.

How to prepare

The first step to ensure your product skills remain up to speed is to identify all of the product areas that will be important to your specific target market, and to build expertise in each of them. You then need to stand back, coldly evaluate your own skills, identify supplementary expertise that will be required and build your knowledge. This might be for example in wealth extraction and exit planning for business owners, inheritance and legacy planning for families etc.

Your next step then is to consider shortcomings in your current product approach. Do you require a centralised investment proposition, is your proposition around sustainable investing sufficient etc.? The final step then is to create a methodology to continually build your product knowledge to maintain your expert positioning. You need to be excellent today… and then remain excellent into the future.

While there is no doubt that some commoditisation will occur in the product space, there will always be room for innovation, expertise and personalised product solutions. My advice is to ignore the naysayers, and to recognise the important role your product skills will play in adding value to your clients in the future.

 

Is your Client Value Proposition future ready?

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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 now consider the second action identified, which is the development of a bespoke Client Value Proposition that you can articulate and communicate clearly to all prospective clients in your target markets and that you can relentlessly promote.

The research found that the successful Financial Brokers of the future are likely to be those who are aware of and focused on advice services where significant value will be experienced by their target market clients, and these being in areas that cannot be easily commoditised.

While the provision of product advice and implementation of product solutions will always remain an important element of the work of Financial Brokers, it is likely that digital advancements will expedite the commoditisation of these services. The research suggests that life will get tougher for Brokers who focus solely on product selling.

Financial Brokers sometimes forget the enormous value they add, providing clarity every day to consumers who are otherwise confused amid the complexity in the personal finance space.  For example, consider the confusion within the pensions market over the next few years. EPPs are no more, PRSAs are suddenly more attractive, Mastertrusts have emerged, auto enrolment is on the way. Advice will become more important than ever, as people will need guidance in steering through this web of complexity in finding the optimal retirement planning products and investment solutions.

While many Financial Broker businesses today might be positioned as product experts, their offering is in fact much broader than their positioning. The wise counsel, guidance and management of client behaviours that are delivered every day by Financial Brokers are extremely valuable elements of the total service offering. Instead of being positioned narrowly as a seller of technical product solutions where the primary objective is choosing the right product, the expectation is that the Broker of the future will instead position themselves as the provider of valued financial guidance and ongoing behavioural coaching to clients.

The research suggests that the most successful Brokers of the future will be those that have a very simple business model, excellent processes and are likely to provide a full range of financial planning and advice services, including product advice as an important element – but not the only element. Their proposition will be based around providing a financial plan to a client and then delivering this plan in collaboration with the client over many years.

This is a common theme around the world. In an interview during the research, the Personal Investment Management and Financial Advice Association (PIMFA) in the UK said, “The growth areas are in financial guidance and planning. While there always have been and will be wealth management businesses, these are all about the money. Financial planning is more about non-financial issues, it provides services around guidance, behaviours, and the well-being of clients. Unlike managing the money, these areas cannot be [as] easily commoditised or digitised”.

There are some specific actions for you to carry out to develop a winning proposition that is future ready.

Start by writing down all the services that you offer to clients. Then critically review the list. Are you doing enough for clients? Are there other services that you should add or are there services that you are currently providing that you are not currently giving sufficient weight to?

Then consider the advice services that clients receive most value from, and that cannot be easily replicated by digital solutions. With the growth in comparison tools in recent years and more recently the surge in Artificial Intelligence (AI) solutions, this list is getting longer, particularly around the product elements of your proposition. But machines cannot tap into emotions that you encounter every day with your clients – worry, uncertainty, doubt, over-exuberance, greed, over/lack of confidence etc. You have the unique skill of identifying the traits of each individual client and guiding them accordingly.

Then you should develop out each of the advice service areas, setting out the features and benefits of each and the value that clients will experience. Being ready to articulate the value of your proposition is the first important step in being able to communicate it effectively to prospective clients.

The final step is to start shouting about it from the rooftops! Promote the breadth and value of your services through all your available marketing and client communication channels. It’s time to inform your target market of why you are the right Financial Broker to meet their needs.

4 ways to increase your income in 2022, without new clients

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Most advisers that I’m talking to have had another strong year in 2021. You’ve attracted some new clients, your existing clients have needed reviews and sometimes revised product solutions to reflect their changed circumstances, and markets have performed well again in 2021 resulting in increased trail income.

But it’s not all one way traffic… I’m hearing many stories of processes taking longer than they should because of service challenges with some providers, an ongoing struggle to retain and recruit the right staff and clients requiring more of your time. Some of you are creaking at the seams a bit and working flat out. Taking on new clients in a real challenge now.

So where does this leave you for 2022? Service issues will continue, the demand for good people is only increasing and who knows, but markets may not continue their steep upwards trajectory. If you won’t have room for new clients, how are you supposed to continue to grow your income in 2022? Here are a few thoughts.

 

1. Review the services you offer

It always come back to your proposition and what you offer to clients… Business usually goes a little client from mid-December to mid-January. Use this time wisely. 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 deliver additional services, 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.

 

2. Attract all of the client’s 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 having been 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 can result in a completely misaligned portfolio? And this often completely undermines the future cashflow planning, which 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.

 

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

Sometimes it’s easier for an adviser to position her/himself as an investment specialist or a retirement practitioner. But then the adviser can be a little reluctant to step outside of his or her specialist knowledge zone and advise in other important areas such as protection etc. Too often I hear, “I don’t really do much protection / investment / pensions” – this is usually down to the confidence of the adviser in delivering in these areas as opposed to the profile of your clients.

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 – it just might be down to working on increasing your knowledge. 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.

 

4. 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 economy was on the floor, 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?

I wrote recently on this topic – have a look here for some thoughts on increasing your rates.

These are just a few ways in which you can look to increase your income in 2022. The next step is to do some more detailed planning around each of them. The very best of luck.

 

 

 

Take out earnings or re-invest?

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Like many of your peers, I hope you’ve had a strong business year in 2021. If so, hopefully that leaves you with the enviable situation of having to decide what to do with the surplus cash in your business.

While I’m certainly no accountant and the views of your own accountant should certainly be sought, here are a few thoughts to consider yourself.

 

Live for today

There are many factors to consider, if you are thinking of taking the surplus cash out of the business for your own personal use. Of course, central to this is the high level of tax that will inevitably be due.

But at the same time, maybe a bit of surplus personal cash is needed. Some advisers take quite small salaries and don’t have a lot of personal wealth outside of their business. Maybe you’ve been working extremely hard through the pandemic and extra cash for a well-earned high quality family holiday, or some other big purchase is exactly what’s needed! This could be a catalyst to re-energise you to drive forwards with renewed enthusiasm.

Of course, your own personal circumstances will dictate here. How badly do you need extra cash? It often doesn’t make sense to take cash out, unless you have a definite need for it, as this may simply rule out better options at a later stage. If cash is needed and is available – well great! If not needed, maybe look at other options.

 

Live for tomorrow

I certainly am not going to attempt to advise you about the value of structured retirement planning and the tax advantage of pensions! Enough said…

 

Leave it as part of tax planning

Alongside your pension planning, there are other ways of extracting wealth from your business, mainly through Retirement Relief or Entrepreneur Relief. These are routes that need careful planning, well in advance of your desired exit date. Leaving cash in the business may give you more options to maximise your opportunities available under these tax reliefs.

You also have the added benefit of a cash buffer within the business, should you experience an unexpected shock to your revenue. This could be very important in the event of a sudden economic downturn, a sharp fall in investment markets impacting your trail income, an illness to you or another key revenue generator in the business or some other cause.

 

Re-invest to increase the value of your business

Of course the other route to consider is to use the surplus resources to increase the long-term value of your business. There are several different areas that warrant careful examination, to determine if they’ll help you grow.

 

Spend money to grow your revenue: Money spent on refining and improving your client proposition that will enable you to charge more or meet the needs of a wider range of clients will be money well spent. Alongside this, money spent on improving and raising awareness of your brand in key target markets through social media activity, advertising, PR and sponsorships warrants consideration. This can be further augmented with a structured approach to marketing your business, with the objectives of attracting new, profitable clients and deepening relationships with your existing clients.

 

Grow your advice team: If you have surplus money in the business, it’s worth considering the benefits of adding another adviser to your team. Of course there are many factors to consider here such as the balance of your team, how an additional person will affect the culture of your business (they hopefully will improve it!), the ability to service increased numbers of clients, reward structures and whether the marginal profit increase is actually worth it.

 

Spend on capital improvements: Does money need to be spent to improve the working environment of the team, that will lead to higher productivity? Or is it worth considering spending money on the public areas of your office to improve the client experience when they visit? With the explosion of remote working and client meetings, money may be well spent on your technology solutions to improve both the productivity of your people and also the experience of clients for online meetings. There is nothing more off-putting for a client than talking to an adviser with a poor camera, microphone or surroundings.

 

Grow through acquisition: While at the moment there appears to be more buyers than sellers, opportunities arise to purchase other advice businesses or indeed books of business. Having a war chest ready to go could just give you the edge in terms of ability to go a quick deal. Of course, being above to make an acquisition with no / less debt or external investment keeps the ownership in your hands too.

 

With extra cash in your business, it comes down to the desire for instant gratification (take cash out), extract it for your own future wealth (through pensions) or retain it in the business for tax planning or business growth. Each have their merits and deserve careful consideration.

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.

Dealing with dementia in clients

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We hear and read a lot of commentary about the challenges that Ireland’s ageing population is posing to the state old-age pension scheme and indeed to pension policymakers. The statistics are indeed quite frightening as we see the scale of the growing population of elderly people being dependent on a smaller workforce. There was a shade under 630,000 people aged over 65 in Ireland in 2016. This is estimated to increase to 1.6million people over 65 in Ireland in 2051.

With this increase in ageing, there is likely to be a corresponding increase in people with dementia. According to Irishhealth.com, an estimated 55,000 people are currently living with dementia in Ireland, the most common form of which is Alzheimer’s disease. This number is expected to more than double to 113,000 by 2036. I’m one of the half a million people in Ireland who have had a family member with dementia, yet despite this widespread experience, research tells us that only one in four of us is confident that we understand dementia.

To look after your clients properly, you need to understand dementia.

Physical ailments don’t impact your client’s ability to make sound decisions about their finances. Dementia does impact this ability, with symptoms that can include memory loss, confusion, difficulties communicating and behaviour change.

These symptoms and the ensuing impacts of a loss of control, vulnerability and worry both for the person with dementia and their family / carers, require very careful and skilled attention from financial planners. Dementia requires a very well-structured, clear and empathetic approach.

When a client suffers from dementia, the financial planner is a critically important contributor in the life of the person him/herself and their family. You play a really important role as money is often a major concern for everyone – they want to ensure there is enough money to provide the best care possible for all of the sufferer’s life. Family members also want to ensure that the vulnerability of the sufferer is not exploited by anyone – having an impartial planner acting in the best interests of the sufferer provides a lot of comfort here.

 

It’s never too early to find out

Dealing with dementia starts with education of your client. Every client should know that if they or their spouse are ever worried that they are slipping mentally, or indeed receive a diagnosis of dementia, one of their first phone calls should be to you. Giving you an early awareness of this future change in their life enables you to help them plan effectively for it.

 

There are early steps to take

Your role will be very gentle and in the background before your client’s mental capacity really begins to diminish. However you can help them enormously at this stage, by helping them with some good financial practices. One of the first advices that you can give them is to immediately put an Enduring Power of Attorney in place, to allow a trusted relative manage their affairs when their mental capacity necessitates it.  This doesn’t “hand over control” today, just when needed in the future. Of course you can play a valuable role with your client by providing them with a 2nd opinion if requested in relation to their choice of attorney. It can be very useful for you to be introduced to the appointed attorney too. After all, both of you have been chosen by your client to help them manage their financial affairs as effectively as possible.

Also you can guide your client in relation to bank accounts, making sure that if they were to quickly lose their capacity, that their money would be accessible. This may be as simple as ensuring spouses have access to each other’s bank accounts. Relatively straightforward actions such as these will save a lot of stress and challenge down the road.

 

Become part of the client’s team

While you will have no role in the actual physical care of your client, in your role as their financial planner you should be watching their back at every turn. This includes working collaboratively with others in their interests, of course with your client’s permission. Seek introductions to their solicitor, accountant and tax adviser. While each of you retains full responsibility for your own areas of expertise, it is useful if the client starts “slipping” mentally for everyone on the client’s team to be aware of this. Early warning can be useful in the early stages of dementia, when some subtle changes and symptoms can be easily dismissed and potentially poor decisions made.

 

Be active with the sufferer’s spouse / family

People caring for dementia sufferers are usually entering a whole new world too. They’re dealing with unfamiliar challenges and a very uncertain future in unchartered waters for them. They are facing a lot of big decisions that they don’t feel particularly well-equipped to make. While a lot of these decisions are about care, many of them have financial angles or implications too. You can play a very important role in helping clients navigate these decisions.

 

Clients with dementia and their families need you. Are you ready to step up to the plate and help them?