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What challenges face adviser businesses in 2015?

The challenges that require we do more for clients, whilst maintaining profit margins and managing the risk we take into our firms, says consultant Phil Billingham

2015 promises to be an interesting year. That makes it 33 consecutive ‘Interesting Years’ since I came into this business. Other ‘Interesting Years’ have involved wars, crashes, recessions, financial crunches and 15% bank base rates, so let’s hope that 2015 does not push the boundaries too far.

This article addresses two separate but interconnected issues:
1. The challenges we face as advisers
2. The challenges we face as the owners of advisory firms.
Taking these in order, it is clear that 2015 will be an extension of 2014 in that we have had to deal with massive changes, and extra work and complexity for clients, often without any clear guidance – FATCA, for example – and without a clear mechanism to charge extra for that work. More on this later.

In April 2015 the first full effects of the new ‘pension freedoms’ will hit. We have already seen the misinformation and misunderstanding in this area, and it would be optimistic to expect this to change between now and April. So we will have potential clients who think:
• That they can access their entire pension pot at any age
• That this will be tax free
• That there will be no charges involved
• That any pension pot remaining should grow at above RPI, but should never fall
• Annuities are a ‘scam’

Main challenge

So our main challenge in 2015 as advisers is this:

How are we going to design materials, guides and presentations that clearly explain to clients what their true position actually is, so that they can make sensible, sustainable choices and ensure we do not take on absurd levels of additional liability?

That brings us to the challenges we face as business owners. Whilst interrelated, there are both differences and conflicts with our challenges as advisers.

As I have said above, in 2014 we were both required to do more work for clients, but we also saw many advisers’ income increase and remain healthy. So despite downward pressures, by and large we were able to deliver the increased work required, and there was enough income – in most cases – to fund it.

Our challenge in 2015 is simple: How do we maintain profitability in a period where more clients will need more advice, at a greater risk to our firms, at a time when there is increasing clamour for us to reduce our costs as, according to some, no consumer should ever pay a charge or ever take any risk at all?

Many of us will recognise this scenario. And for old problems, old solutions often work best.

I am reminded of the words of the late, great David Norton, where he set out to build a firm whereby clients would “cheerfully pay our fees”.

The genius is in the word ‘cheerfully’. If we can deliver the level of service and re-assurance that clients want and enjoy – the ‘client experience’ – then the pressure on our fees levels will be reduced. Interestingly the NMG research that was published alongside the latest FCA RDR feedback alludes to this. It speaks of trust, and feelings of security and the importance of the relationship. All good stuff – have a read of it by clicking here.

Six point plan

So how do we do more for clients, whilst maintaining profit margins and managing the risk we take into our firms?

This is going to be about:

1.Having clear, published guidelines as to what cases we take on, and sticking pretty close to them
2. Involving paraplanners and other staff as much as possible to reduce our costs
3. Standing firm on fees – we are worth it
4. Educating clients so they can give informed consent to actions
5. Ensuring that the compliance function is 100% on board with what we are trying to achieve – and that we listen to them as well
6. Keeping close to clients – structured reviews will be critical.

2015 will be interesting. But UK firms that are still surviving and thriving two years after the massive upheaval of RDR have shown world class – literally – standards of advice and resilience. We would expect most firms to continue this in 2015.

Visit the Phil Billingham Partnership website



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