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Client bank migration

Rob Kingsbury talked to Damian Davies, director of paraplanning service 
The Time Bank, about Migrate, the service launched earlier this year to help adviser firms deal with the acquisition or servicing of a large number of client accounts

Rob Kingsbury: First tell us briefly about The Time Bank. You launched it in 2003 after being an adviser yourself, is that right?

Damian Davies: I was an adviser and then I became a paraplanner, with the intention of becoming really technical and coming out the other end as a super adviser. Then when I was doing the job I found I really enjoyed it and it occurred tome that there was tremendous potential to start a business.

So we launched in 2003 and we’ve gone from strength to strength. We’ve got a good team of 24 people now, backed by a sound corporate structure. What we’ve done is take the traditional paraplanning role ofgathering and analysing data and producing reports and created two teams to deal with it: a support team that gathers the data and puts it in a consistent language; then we have the technical team that analysesthe data and undertakes the production of the reports.

We work collaboratively and we believe that is very important both internally and with our clients, because our clients engage us as an extension of their team.

RK: What is the minimum qualification that your staff must have?

DD: For the support team there is no minimum qualification.What they must be is tenacious. They have to make sure we
get all the information we need when we need it both from product providers and our clients. That said, within the support team we have people with QCF4, people who have built pension schemes, people who have been advisers.

In respect of our paraplanners’ qualifications, on
the technical side we like
them to be QCF6, chartered or certified. The reason for this benchmark is that when I meet them I don’t want to be worried about whether they can do
the job technically, I want to concentrate on their personality and attitude.

We also have a trainee paraplanner role. They are QCF4 qualified and moving towards chartered of certified status.

RK: Turning to Migrate, among other services this provides
service for acquiring firms integrating new client banks. What are the main issues being encountered by those firms when moving a client bank en masse to their own practice?

DD: That’s a huge question. There are a number of different problems. The largest problem, particularly for larger firms, is culture. If you’re bringing two businesses together you are bringing two cultures together and sometimes that works beautifully and other times it doesn’t.

The other important element is ensuring a realistic transition. Where people go out and buy assets under management, it may not be as successful as people buying a relationship with a client. Buying assets under management without that relationship element is much more tenuous these days, now the client is paying a fee and will question what they can expect for that fee.

Where the transition works really well, for example, is where the business being sold is owned by a retiring IFA and that retiring IFA comes into the practice for
a period of time to help educate the clients on the service they are going to get within the new business. The relationship is what it’s all about these days.

RK: In terms of the operational practicalities in moving data, what are the difficulties?

DD: The main difficulties are resourcing the move. If you look at the two main scenarios where asset migration is used, it’s either when buying a business or in dealing with a large back book. Within a really good business there are advisers, paraplanners and support staff, all of whom have a day job and dealing with these scenarios means trying to fit additional work into their working week.

A firm may already have moved the top 20% of clients
to its new service proposition but then there is the legacy book of the remaining 80%. These may not be the most profitable clients but the firm will still want to engage with them because the income is valuable and it has created a service proposition that is designed for those clients, but it’s finding the time to deal with them as well as service the top 20% of clients.

Where businesses have tried to take on the asset migration themselves, often they’ve had to decide not to take on any new clients while the job is undertaken over what could be a 12 month period. Somewhere along the line there is that pinch point because everyone is already committed in their role.

Alongside this, there are dangers in engaging with back book clients and dangers of
not engaging with them. If you don’t engage with them they could become someone else’s clients or start self investing, or if you do engage with them and you don’t commit to it fully you expose yourself to the risks of doing half the job.

The alternative is to ship in people like us.

RK: So as a solution, where does Migrate fit in to that scenario?

DD: It fits in a number of different ways. The first thing we say to firms is that Migrate works as project, so it lasts a finite period of time, whether that is six, 12 or 18 months, whatever is appropriate for that firm.

The idea is that the firm can carry on with their day job, they can see existing clients, they
can see new clients, they can carry on business as usual, while for the back book or acquired book we act as ‘money ninjas’, analysing what they’ve got, putting a report together so advisers can see the position and what they’ve got to deal with.

The important point to stress is that it is very much a project. We’re not interfering in theirday-to-day job or telling them how to do business; we go
in, get the job done and then disappear.

RK: If a company has bought a client bank of several hundred clients and you need to undertake individual profiling for each client that is a considerable amount of work, how do you go about tackling that kind of job?

DD: What we do is look at the service proposition and what the client is going to get under that proposition, i.e. what’s the investment proposition, how is money managed, are platforms used, are clients segmented. Once we know the strategy the firm employs, we then analyse how that works tactically for each individual client.

For example, if we take a firm that has three client segments A, B and C, depending on the value of the clients. The firm probably has already engaged with the very high value clients, the A segment, and also will have a process in place for dealing with the B and the C clients. This will include the process, research and due diligence that decides how the firm invests money for clients. What we do is see how that works for the individual clients.

The first thing that we do is filter the client bank. So we take the data from the firm’s back-office system and overlay that with the rules the firm has decided upon, such as

not disrupting any client aged over 85 because they consider it’s not the right thing to do. That then helps us filter out who should be involved in the project in the first place. So we filter the clients who shouldn’t be disrupted and the firm will then engage with those clients to explain what the basis of the service will be going forwards.

For all of the clients that look like they will benefit from the new service proposition, we undertake all the analysis in order for the adviser to be able to have aninformed conversation with
the client about the action
they should take. So we will look at the attitude to risk profiles, where their money is invested currently, do the cost comparisons and look at any advice implications like penalties for moving investments or products. Then we’ll deliver that in a report so the adviser can decide on the advice path. We’re not telling the adviser what to do, we’re providing them with the information they need. It’s all about the advised process and the relationship the client

is going to have with the firm at the right service level.

RK: In what other ways are advisers using Migrate, apart from as part of the acquisition process?

DD: There are three main ways advisers are using our service. First is to project manage post acquisition. Then what we’re increasingly seeing is that we’re being called in pre acquisition. When two firms are looking to come together we’re getting involved in assessing how feasible it is to actually move the clients. If you think of situations where firms are acquired and then reacquired, there can be considerable disruption to the client. By bringing us in pre acquisition, we can say thatfor the most important person
in this process, ie the client, it may not be right given the set of policies they hold to be moved to a new proposition.

Then the third way advisers are using us is to deal with their back book. It’s the Piretto principle; they’ll have dealt with the top 20% of their client bank and engaged with them and then they’ll bring us in to deal with the 80% who they know are valuable and that they should engage with because it’s good for the client and good for their business,but they simply don’t have the resource and time to do it.

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