Increased complexity and consumerism are among the key trends that have emerged in the retail investment market in recent years. These trends place additional responsibilities on the adviser. The trends require that the financial adviser, in order to meet client demands, devote more time to the individual needs of clients and be in a position to offer advice on a broader range of financial needs than previously required. It is also important that the adviser is able to demonstrate that an independent and unbiased process drives the choice of product and underlying investment solutions.
Product provider selection is expected to become increasingly important for financial advisers from the perspective of the quality of investment advice provided. Elements to be considered when selecting product providers include client perceptions regarding the independence and objectivity of advice, operational support, regulatory compliance, differentiation and the customer value proposition. Owing to their relationship, product providers should be seen as an extension of the investment planning practice.
In selecting product providers, criteria relating to product, service and relationship quality as well as overall perceptions regarding the provider, need to be considered. Product quality relates to the competitiveness of the product from a pricing, value-add and performance point of view, the flexibility of the product and the ease with which the product can be marketed. A carefully selected range of quality and innovative products that can effectively meet the needs of the client base will provide the practice with a competitive advantage.
The financial adviser can use service quality criteria such as access to information, error-free business processing and administration, prompt instruction response and processing times and service flexibility by adapting to specific client requirements. Product provider service quality supports and complements the investment planning practice in its efforts to provide superior customer service.
Given the impact of the requirements of FAIS on the operational abilities of an investment planning practice, product providers are in a position to offer considerable value from a regulatory compliance perspective. Through the product provider’s ability to provide specialist expertise, advice tools and access to product and client information, the financial adviser is in a better position to offer quality advice, explain technical aspects of the investment advice provided and to monitor and review client portfolios.
Other than identifying and selecting product providers, the setting up of service level agreements, the negotiation of fees, and defining the scope and level of services provided are key elements required for the effective ongoing management of the product provider relationship. These elements need to be reviewed on an ongoing basis as circumstances change, to ensure that the investment planning practice continues to live up to the stated customer value proposition and deliver according to the expectations of the client.
A fine balance needs to be maintained between building and maintaining mutually beneficial relationships between the financial adviser and the preferred product providers and ensuring that the products selected meet the client’s investment needs and objectives. It is suggested that a core set of product providers are selected to provide the investment planning practice with the necessary reach and depth of product offering to meet the needs of its client base. Selecting the appropriate product platforms will make it easier for the independent financial adviser to be viewed favourably by the customer, as it improves the adviser’s ability to focus on offering appropriate advice.
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