A new business model for independent financial advisers

Building a successful financial services practice is not easy. Independent financial advisors (IFAs) must not only boast a full set of business skills, but also comply with the increasingly complex regulatory environment. Considering the mounting administrative and compliance workload, financial advisors are left with less time to focus on the important aspects of prospecting (marketing to new clients) and selling (servicing existing clients). What can the struggling advisor do to ease the load?

One option is to solicit more support from product providers, which is why Sanlam recently announced it “would empower independent financial advisers or intermediaries to build up their own independent businesses.” The group has launched a supported business platform for IFAs to enable them to focus on writing new business. According to Jaco Coetzee, general manager of Sanlam Financial Advisers, “the ultimate aim is to improve the IFAs service to clients, increase its income and ensure its financial future.”

Introducing the ‘BlueStar’ business

IFAs that join the venture will trade as ‘BlueStar’ businesses. Apart from assisting the entrepreneurs (and employees) with “extensive training,” Sanlam will also “make its technology, marketing and management expertise and legal and financial support available to the new businesses.” Sanlam has trialled this business model by supporting its own financial advisers since 2007. Owners of the BlueStar business will, for the most part, operate independently under the Sanlam brand. They will be responsible for building a unique financial services business, will be able to recruit and appoint their own staff and be able to “recruit partners and other stakeholders, who will be trained by Sanlam in the various aspects of financial services over a period of 24 months.” Business owners must hold at least 51% of the business, with 49% available to other stakeholders.

At present the BlueStar business owner will be drawn from the ranks of existing Sanlam advisers, but the group will consider independent advisors in the future. The BlueStar business will conduct most of its business through Sanlam, with a maximum of 15% of new business allowed to be placed with other insurers. “Businesses that excel will be rewarded with special bonuses,” says Sanlam. The company will provide interest-free set-up loans (of up to R50 000) and owners will benefit from their own retirement fund, life insurance and medical scheme. Other assistance offered by Sanlam includes “advertising, sponsorships, the presentation of conferences and subsidised internet access and e-mail addresses.”

Training already underway

“A number of Sanlam advisers have already started their training and the first BlueStar businesses were operational in May this year,” said Sanlam. They reveal that each business is split into a professional entity and an administrative entity, with the client base housed in the latter structure. Sanlam conducts a comprehensive audit of each existing IFA business before deciding whether a conversion to the BlueStar business model is feasible. Once the IFA is given the go-ahead, Sanlam will transfer existing clients from the Sanlam database to the BlueStar business.

“Sanlam has appointed eight managers to assist advisers with these businesses and support IFAs on an ongoing basis,” says Coetzee. “The training programme focuses on leadership development and is specifically aimed at transforming ordinary financial advisers into autonomous entrepreneurs and leaders of their own BlueStar businesses.”

Editor’s thoughts: The BlueStar business model has some clear benefits for existing Sanlam financial advisers. The question is whether the benefits offered by Sanlam are enough to lure truly independent financial practices into the insurer stable. Do you think an independent financial adviser can be successfully ‘nested’ in an insurance company? Add your comments below, or send them to [email protected]

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