Are IFAs ready for increased regulation, changing client behaviour?
A great many independent financial planning practices in South Africa are operationally inefficient and lack the strategic thinking to allow them to deal with increasing regulation and shifting patterns of consumer behaviour – this is the verdict of Mike
Independent financial advisors fall within the small business fraternity here in South Africa, and their practices, like other businesses, need to grow, innovate and differentiate themselves to survive. They have to focus on what threatens their survival and confront it.
Although the electronic financial supermarket trend hasn’t quite caught on yet, IFAs need to consolidate their position while consumers favour personalised service. Adaptability will be the key to success as consumers become better informed and educated, more streetwise and more demanding.
“Client focus has shifted to the costs and performance of products, they have an overwhelming amount of information at their disposal and they are able to purchase investment and insurance products through intermediaries or directly on the internet,” Clare said. “IFAs with the strength of character and foresight to recognise that change is essential will quickly catch up with the high levels of service and professional advice offered by their international counterparts.”
Clare highlights the fact that lifestyle planning, vertical integration and co-opetition (co-operative competition) are trends that IFAs need to be aware of and integrate into their business models.
Partnerships with like-minded peers
Clare says that the change in the way the financial planning industry conducts business, will have positive effects – particularly as IFAs professionalise their practices, both strategically and operationally. “They should renew their focus on self-education and become aware of the value of relationship marketing, networking, partnership, customer delight, reputation management and consultative selling.”
He believes that IFAs who lock themselves into partnerships with like-minded peers (even across disciplines like accounting) and product providers that complement their businesses will stand out. He believes professional practices have the following winning attributes:
· A clearly defined business strategy formulated with the help of outside expertise.
· A clear vision, quantifiable business objectives and a plan that can be implemented.
· A culture of eliminating operational inefficiencies.
· A passion for developing themselves and their people.
· The aim to transform to a fee-based remuneration model.
· The ability to embrace technology as an ally, not a threat – they use technology at the point-of-sale and in the back-office.
· A habit of spending more time on their outboxes than their inboxes.
· A drive to grow their annuity income.
· Well-selected partners.
Clare also believes IFAs need to challenge the retail fee conundrum by offering clean pricing, free of confusing rebates and vague descriptions of underlying costs. Eliminating administration cost to clients is a further strategy.
Editor’s thoughts:
Threats to IFAs abound and as profit margins shrink they will either move back into a corporate environment or, if they do not do so, forge ahead but perhaps struggle to put their clients’ interests first. Yet it is critical that they do so to retain those clients. For this reason, having a sound long-term strategy and a clear idea of the quantum of their value will keep IFAs ahead of the curve. Do you agree with Clare’s assessments? Comment below or email fiona@fanews.co.za.
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