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Is D2C an opportunity for financial planners?

Are financial planners viewing the ability to offer online D2C services as a business opportunity and if so, in what ways? We asked Institute of Financial Planning chief executive Steve Gazzard what he’s seeing in the market.

ABR: From your conversations with financial planners, are they seeing the ability for firms to offer online D2C propositions as an opportunity for their businesses, or as a potential market disrupter?

SG: I don’t think they see it as a disrupter. Where our members see opportunities is mainly around providing a service to the children of their key clients and it’s a matter of finding the right type of service proposition and technology to support that service.

Anything that raises awareness of the need to save and invest and gets people thinking long-term and accumulating wealth has to be good news. The more people get into saving the better it is for the country because household savings rates are appalling at the moment.

If people start by using a simplified advice service then at some point, as their wealth grows and their finances become more complex they will understand that they need something more than a simplified advice model and that may lead to them seeking professional financial planning.

ABR: There are online transactional/guidance platforms that firms can white label as their own. That could widen the business opportunity beyond existing clients. Are you aware of any financial planning firms looking at that as an option?

I know of quite a few that are looking at it, as a way to help clients who don’t necessarily fall into their ideal business model but still want some support and help and who potentially could be clients in the future.

And why wouldn’t you offer an online service if you’ve got enough customers that might want to use it? You might start off by offering a simple transactional service; but firms going down that route will need to put some marketing spend behind it if they are going to really get to the numbers they need to make it worthwhile. If firms have a corporate side to the business then they could offer it to employees of the companies they work with.

But for most financial planners, I think D2C is going to be more about the opportunity to offer a service to the children of existing clients, or as a means of developing a connection with professionals in their area who might have simpler financial planning needs now but could become clients in the future. It’s a way of building a relationship with a person ahead of their need for the firm’s core services.

There’s a range of plug-in models out there, from those allowing investors to buy their annual ISA through to those that have a pseudo financial planning approach, which allow the user to do simple cashflow planning and budgeting. For me, the latter would be a better fit as a service from a financial planning firm rather than a simple buy-an-ISA offering. That said, if you’ve got a market for it that you can promote it to then by all means why not, some of those clients could turn out to be great financial planning clients in the future.

ABR: Could it be a way to enhance a firm’s brand and build a greater presence in the market?

It could be but most financial planning firms want clients of a certain type. Unless you’ve got a corporate side of the business where you’ve got access to a large number of employees or you acquire a bank of clients through a merger or acquisition and it’s a means of offering a service to those that don’t fit that client type, then you’d have to question the time and energy you’d need to spend in marketing it. As a marketing tool it would need to be very specific to the firm that is employing it.

Also, I think it’s very difficult for smaller financial planning firms to build a brand, which is why it might be better for them to work with the clients that they have close relationships with already rather than going out and trying to start a new side to the business.

But there may well be another Hargreaves Lansdown out there just starting off and if there is, good luck to them.



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