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Better business: Back to basics

Brett Davidson

The Retail Distribution Review (RDR) has rather forced everyone’s hand. You now do not really have an option other than to transition from a transaction-based business into one that creates a long-term renewable income stream. Furthermore you will need to be pretty good at it otherwise the client will now be able to turn off your income.

In the past many advisers have made the decision to charge fees and started asking clients to pay them without first looking at what the new client value proposition will be. As a result, clients who have often been ‘conditioned’ over many years to believe they are obtaining advice for ‘free’ meet the first few efforts with resistance. If this has happened to you, however, do not lose heart. Every business owner trying a new methodology experiences some form of setback initially.

Clients are not going to hand over great wads of cash each year just because you think you are worth it – nor should they. In addition to explaining your value proposition, you will have to ‘educate’ existing clients as to why the way you are paid needs to change. Simply explaining to clients “the FSA made me do it” might work in the short term but the reasons put forward had better be about the client or else you will not keep your clients and your income in the long term.

So where do you start?

Why not start with your current value proposition. For most advisers in the early stages of moving to a recurring income model their value proposition might be something like:

  • 1 x annual review meeting

That is hardly the stuff of legend and, more importantly, hardly likely to inspire someone to pay you several thousand pounds for the initial advice and another few thousand per year in review fees. But you do a lot more than that, don’t you?

If I am one of your best clients and you have promised me one annual review every year and I then call you in between review dates, would you take my phone call? Of course you would. So let’s add to your list of services something along the lines of:

  • You receive unlimited telephone access to your adviser

What about if I sent you an email between review dates, would you answer me? Of course you would, so let’s also add:

  • You receive unlimited email access to your adviser

And what if I wanted to come and see you between review dates, would you let me? Of course. So let’s add:

  • You receive unlimited face-to-face access to your adviser between review dates

These are tangible ways of showing new clients you are available. Do not worry at this stage about clients abusing the word ‘unlimited’. I assure you no one wants to come and talk to you for no reason and, in any given 12 months, only a very small percentage of clients will contact you between review dates anyway.

So let’s keep going. If I am an existing client and my accountant calls you requesting some information about my investments to complete my tax return, would you supply it to them? Yes you would and in fact you probably already do. What if I do not have an accountant and I need one, would you refer me to one you knew and trusted? Again, yes you would. Let’s call that:

‘The Professionals Service’
-    Providing strategic updates to your other professional advisers;
-    Supplying end-of-year taxation information (as required); and
-    Recommending suitable professionals as other needs arise

Can you see how all this is starting to build into something far more comprehensive-looking and something that better reflects the work you actually do? Just quickly, let’s list the other things you currently do – portfolio design and construction; portfolio management; returning client phone calls and emails; helping clients sort through the paperwork they receive from various financial institutions; and providing a second opinion on investment ideas the client may come across in the outside world.

We can then craft these into the following services:

The ‘Portfolio Construction Service’
-    Using a scientific risk-profiling methodology (for example, Finametrica);
-    Design of suitable asset allocation; and
-    Portfolio design and construction

The ‘Portfolio Management Service’
-    Online access to portfolio valuations;
-    Portfolio monitoring; and
-    Re-weighting of asset allocation to benchmark; and
-    Written portfolio valuations on request

The ‘Priority Response Service’
-    Phone calls & emails returned within 24 hours (or whatever your firm can deliver consistently)

The ‘Remove The Hassle Service’

The ‘Second Opinion Service’

Finally, here are some other ideas for some services you may already be providing that can be added to our growing list:

The ‘Inheritance Tax & Estate-Planning Service’

The ‘Taxation Planning Service’

The ‘SIPP Service’

The ‘Pensions Service’
-    Pensions advice;
-    Pensions review; and
-    Pensions consolidation

Now, if you do not provide or do not wish to provide all of these services, that is fine. But I suspect a lot of these things you already do. If you have ever been challenged by a client regarding your fees and struggled with the response, creation of a list of services like those above should help greatly the next time you are asked.

But more importantly, why not provide existing clients with this list at their next meeting to reinforce the value you provide, or to assist in moving them across to some form of annual review service. An example of what this might look like can be seen in the accompanying illustration. This is the key issue in surviving the RDR – making sure you can continue to be paid your annual fees for the long term.

Creating a list of services makes what is largely an intangible service appear tangible to new clients from the outset. It can also be used with existing clients who may never have been shown all that you do for them.

What is being proposed in all of this is not a change in what you do for clients but a change in the emphasis placed upon the various parts of your existing service. Despite what they may tell you when they walk in the door, most clients are looking for a trusted long-term relationship. By creating a viable, long-term service proposition, you can charge a fair price for that service and deliver it consistently.

Have a look at how this now becomes a marketing document that can be used with new and existing clients alike. In looking to change the way you do business, you will – as the example below illustrates – have to change the way you do business. Obviously you can tailor something like that to the needs of your business and your target clients.

Does this look like a professional service worth paying for? It is starting to look like a high-quality financial planning service that is worth several thousand pounds a year – and, because you are already doing most of it, it will not add one penny to the cost of running your operation. With some work on your part, a service like this can be crafted to suit the needs of your clients and your business and make you RDR-ready.

More from the latest Hub News

Dear Client,


At [XXX] Financial Services we believe professional financial advice can add significant value to individuals and businesses. It is because of this belief that we provide a comprehensive ongoing review service designed to create real value for our clients.

As your partner in building wealth and security, we focus on ways we can help you to live the life you want to live. By engaging [XXX}, you assure yourself of regular financial check-ups and access to new ideas brought to you by the [XXX]team. Choosing a financial partner is one of the most important decisions you will ever make. Take your time, choose wisely and we hope we can earn the right to work with you into the future.

The XYZ Partner Service 
An annual review meeting with your adviser including • a complete review of your financial strategy
• the [XXX]12-point financial health check
Unlimited telephone and email access to your adviser  
Unlimited face-to-face access to your adviser between review dates  
The Professionals Service • providing strategic updates to your accountant and any other professional advisers
• supplying end-of-year taxation information (as required)
• recommending suitable professionals as other needs arise
• ensuring everyone on your financial team provides advice in a co-ordinated and professional way
The Portfolio Construction Service • using a scientific risk-profiling methodology
• design of a suitable asset allocation
• portfolio design and construction
The Portfolio Management Service • online access to portfolio valuations
• portfolio monitoring
• re-weighting of asset allocation to benchmark
• written portfolio valuations on request
The Priority Response Service • phone calls and emails returned within 24 hours
The Remove The Hassle Service • taking the complexity and hassle out of administering your financial life
The Second Opinion Service • making ourselves available to consider new ideas from wherever they may originate
The Inheritance Tax & Estate Planning Service  
The Taxation Planning Service • in conjunction with your accountant and other taxation advisers
The Sipp Service • value-added strategies using self-invested personal pensions
• specialist advice for owning business premises
The Pensions Service • pensions advice
• pensions review
• pensions consolidation

Source: FP Advance

Brett Davidson is chief executive of transition planning leader FP Advance and can be contacted on, 020 7431 3663 or via 

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