Part 1: Creating a win-win strategy for a sustainable practice

06 March 2017Myra Knoesen

In South Africa the financial services landscape is facing a hurricane of changes not to mention the issue of regulation, customer awareness, the threat of direct competition, skills shortages, market competitiveness and inflation. It is concerning and the question is, will advisers be able to adapt and survive these changes in a sustainable manner?

Pondering the thought, it is often difficult for advisers and intermediaries who are under increasing pressure with legislative bodies that are demanding more, to maintain the right balance between providing all the required information to clients, maintaining a competitive edge and running their practices in sustainable and ethical ways.

Daniel Russell, Managing Director at Verbatim Asset Management, a UK base company that offers a complete supply chain management service helping advisers to power profitable and compliant business models, recently shared some interesting words of wisdom for advisers. 

The company supports advisers to ensure the advice process that they deliver keeps them firmly in control of client relationships, by adding value at every step of the service cycle, through a range of tools and resources that support adviser charging and client retention.

Words of wisdom

“Amid the maelstrom of regulatory activity and continuous market change, I often hear owners of advisory businesses talk about the struggle just to keep up with it all, let alone consider the big picture items,” he said. 

Building capital value in an advisory practice requires a focused mind, said Russell. He believes business owners should ask themselves three fundamental questions which are; what business am I in? Why am I in this business? And, what do I want to achieve with this business?

It is important to look at practices to identify how to adapt methods for continued success and sustainability. According to Russell, the answers to the questions above are fundamental to creating a winning strategy for your business.

So without further ado, let us look at the three fundamental questions that Russell highlights.

Determining your expertise

Russell mentioned that it is essential to determine what business you are in. He advises you to ask yourself if you are in a financial advice business. “Are you a wealth manager? Are you a financial planner etc?” He stated.

“There have been countless firms across many sectors that have lost sight of the requirements of their customers. For example, the American railroads company who thought they were in the railroad business, but were actually in the business of transporting people and goods - a misconception which led to them eventually losing out to the airlines),” said Russell. 

He continued by mentioning that there are also examples of businesses that used their resources and capabilities to shift their delivery in line with their customers in order to thrive (such as IBM, focusing on technical services and consulting and selling off its PC and laptop manufacturing).

“If you are charging fees yet are still in the business of intermediating products, I believe you have a serious problem. However, charging fees for valuable financial planning that is not reliant upon the intermediation of any one type of product is a way of aligning yourself directly with a growing consumer need,” he said.

Looking at a bigger picture

The next question Russell deems important is to ask yourself why you are in the business. He mentioned that some people build a career around their hobby, but you often do not find many people whose hobby is dealing with other people's finances. 

Firstly, there is the issue of finding clients and gaining trust from clients, then there is the issue of investing the clients’ money in sustainable and profitable vehicles thus, assuming this a hobby most people find unattractive.

Therefore Russell emphasises that you need to ask yourself what you are doing this for. “Is it to pay the bills? Is it to grow an empire, or to take on the challenge of seeing what you can achieve?” He said.

He further stated that understanding the motivation for running an advisory business is key, because then you can focus on the third question which is “what do you want to achieve with this business?”

Russell asked, “Do you want to grow, expand and bring in more people? Do you want to sell up and sail off, literally on your new boat, after a few years? You cannot build a focused business strategy unless you really know what you want to achieve.” 

A long-term goal

“Write down the targets. It could be a date for retirement, an ongoing income you want to achieve or a capital lump sum you wish to receive. Succinctly stating the goal is the first step to making it happen,” he stated. 

Of course, Russell said that you then need to break down the plan of how you are going to achieve these goals. “Regardless of whether you want to acquire other firms, sell up or grow organically, there is one thing in common across all these goals - none of them will be achieved without a plan,” he said. 

All of these potential strategies require a few key building blocks in order to succeed and Russell said they are:

  • A clear, unambiguous client proposition; we charge these fees for this service and we can articulate that very succinctly.
  • A focus on the consumer, not on financial services; there is no research to suggest that clients care which platform, funds, or product you use. They care about the clarity of their plans, how credible it all appears and how consistently you will deliver. So start focusing on these things, not on the stuff they do not care about.
  • A clear, robust supply chain; you need to be both compliant and profitable. This starts by having a supply chain of solutions that match your clients' needs, especially their approach to risk, and you should be able to change these suppliers overnight without it affecting the service you offer your client. They should be buying you, not the funds or platforms.
  • Get the IT sorted; a mismatch of systems and spreadsheets does not help with either expansion or sale. A streamlined and efficient flow of information from front to back office does.

Sealing the deal

With these things in place, Russell noted you are in position to generate sticky client fees; fees that are paid because clients value the service, regardless of who is delivering it.

“This allows you to expand your business or sell your business with much greater ease. A clear structure is easier to integrate acquired firms into and is easier for an acquiring firm to take off your hands,” he continued.

“So, it is worth taking time out from the noise, from the day to day grind and to step back and work out the method you will use among all this madness to achieve what you want to achieve,” concluded Russell.

Bookmark and Share


Quick Polls


The FSB is thinking of scrapping Level II Regulatory Exam (which would have tested product knowledge) in favour of an approach that forces insurers to train staff and monitor their actions. Do you agree with this approach?


Yes. The Level II Regulatory Exams were a massive headache for those who had to write them
No. At least with the exams you knew who were the top achievers. A lot of trust now needs to be given to insurers.
AE fanews magazine
FAnews June 2017 EditionGet the latest issue of FAnews

This month's headlines

FIA Awards… a whole new journey
Old Mutual Insure steps out of the box
State intervention for microinsurance: justifiable?
Big Data; the new ‘oil’
SA – a fallen angel? Investing in a junk status economy
Subscribe now