Is your practice well managed?

Running a financial planning practice has become increasingly challenging. From Treating Customers Fairly (TCF) and the Retail Distribution Review (RDR) to fees and robo-advice, modeling a business to efficiently deal with all of this can be challenging.

In order to navigate through the sea of difficulties that lie ahead, the most important aspect is to look at business practices and models, and to identify how to adapt methods to aspire to continued success.

Alexi Coutsoudis, Financial Adviser at PSG Wealth Umhlanga Ridge, Johan Borcherds, Financial Adviser at PSG Wealth Pretoria East, Robin Stoakley, Head of UK intermediary, Schroders and Ronald King, Head: Strategic Research and Support at PSG Konsult looked at how practices are adapting and succeeding both locally and globally at PSG’s Annual Conference.

International waters

According to Stoakley, the major issue in the UK has been RDR. “The value of advice is now much more highly regarded then it was pre-RDR. However, the biggest negative consequence coming out of RDR is the emergence of the advice gap.”

“The value chain is becoming a burden because now you have a set price for services, administration etc. The single most important part of the value chain however, has increased the perception of financial advice,” he said.

“I think a lot of financial planners leave the market after three to four years because they have not been able to adapt to a fee driven client agreed remuneration process. RDR has achieved its primary objective which is getting rid of the cowboys, so the industry is much more professional. The consequence is that there are a lot less independent advisers and a lot more restricted advisers,” continued Stoakley.

Local territory

In South Africa, King said it’s a little different. “We already have the Financial Advisory and Intermediary Services (FAIS) Act which puts in place the professional requirements for financial planners. However, what we need to realise is that we are probably going to see the minimum requirements increase over time,” he said.

King believes there is an over emphasis on independence. “Why be independent if you can be restricted to the best. Overseas the advisers who really coax on independence have become negligible. Most of them have selected the restricted route. In South Africa we are still in debate over the independent, tied and multi-tied adviser,” he said.

“Post RDR the adviser is guaranteed the outcome of any advice given to the client and that is extremely important given that you have no control over most of the factors that are determining the outcome of the book,” he continued.

He believes we will see more and more fines, decisions and judgments on advisers.

Standardising systems

In conquering these difficulties,Coutsoudis mentions that client relationships are key. “It is important to consider the whole market but then provide the solution for an individual client.”

Coutsoudis mentions that freeing up some time is important to have quality time with clients. “If we do not start standardising and using the systems already available we are going to make it difficult for ourselves. Thus using systems to digitise what you can, can make processes easier and simpler.”

Stoakley believes that there is always a place for traditional advice because it is personalised guidance, however; advisers must learn new ways to engage with clients.

“In my opinion, the superior model that emerged is the hybrid model – some form of robo-advice with a personal element. Robo-advice on its own, I believe, will not deliver,” said Stoakley.

King and Coutsoudis both agree that client segmentation is important to see where potential income is. “Enter all client data to ensure you know clients well so you can discuss the expectations and deliverables with the client,” said King.

“Post RDR this is important because you are going to have to deliver what you promise,” added Coutsoudis.

Borcherds firmly believes that quality staff take a lot of pressure off an adviser’s hands and help with clients. Thus he encourages advisory firms to embrace the value of the office.

Running a successful practice

To run a practice smoothly Stoakley advises advisers to segment their client base, consider offering differential levels of service and use as much smart technology as they can.

“That is what successful financial adviser practices have done post RDR in the UK,” concluded Stoakley.

Borcherds encourages advisers to utilise all the tools available to them and try and not be too ‘smart’.

In concluding, Coutsoudis said advisers must use what they have and not take anything for granted, leverage off tools and realise that if they put in the time, they will reap the rewards.

Editor’s Thoughts

As mentioned above, if we do not start standardising and using the systems already available we are going to make it difficult for ourselves.The most important aspect is to look at business practices and models, and to identify how to adapt your methods to aspire to continued success.But, is it easier said than done? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.

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