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Don’t rule out one-off transactional clients

While there are sound business reasons for advisers to only want to serve long-term clients, ruling out transactional customers could see firms miss out on ‘fantastic opportunities’, PFS chief executive Keith Richards tells Rob Kingsbury

There are sound business reasons for adviser firms to want to build their business on long-term client relationships, not least for the stability in revenue stream generated via the ongoing service proposition. But despite the fact that the service-based route is being heavily promoted in the industry, advisers should not rule out taking on one-off transactional clients, says Keith Richards, chief executive of the Personal Finance Society.

“If we are moving from an industry to a profession then we need to look at how other professionals run their businesses,” says Richards. “Both accountants and solicitors offer ongoing serviced-based propositions but they will also deal with one-off transactions, such as Will writing.

“What consumer groups have been saying to us is that consumers will often want the benefit of some professional support but don’t necessarily want to be told by an adviser that they can only have that support if they sign up to an ongoing relationship. They may just want to come and talk to an adviser because they’ve inherited some money and want advice on how best to invest it and what are the tax implications.

“That’s thought provoking because while there is a huge amount of logic in advisers focusing on an ongoing service-based proposition, the same logic doesn’t necessarily apply to a consumer. Firms should consider working like an accountant or solicitor and accept that the consumer might have a one-off transactional need. Once the customer has experienced the advice process and established in their mind the value of an adviser’s service, then they may recognise that actually they would really like to engage with a more serviced-based proposition.”

As such, not providing a transactional service could create a barrier to engagement which otherwise might have led to a long-term advisory relationship, Richards points out.

“We have to be careful from a business perspective that focusing solely on ongoing service-based relationships that we are failing to address things from a consumer perspective and only looking at it from our firm’s position.

“Any firm that says it wouldn’t deal with anyone with seemingly a purely transactional need could be missing out on lots of fantastic opportunities as a result.”

Case in point

To illustrate his point, Richards describes how one Chartered Financial Planner who needed to build a new client bank and who used transactional basis to bring in work and build a sustainable practice.

“The adviser had just qualified as a Chartered Financial Planner and joined a new firm,” Richards explains.

“She put out an advert that said for a fee of £250 consumers could buy the services of a Chartered Financial Planner who would undertake a focused retirement review for them. The review would include an interview, gathering all relevant information and producing a retirement report which would explain all of the options available to them, including tax treatment, health issues, and so on.

“She received plenty of positive calls to the advert. Every one of the calls that came in were from people with assets of more than £200k-£300k.”

Instead of giving a free consultation, like many advisers do when trying to win a long-term client, Richards explains, what she did was charge for her time to demonstrate her value.

“She said to the clients that they were free to go and do what they wanted with the report because what they were paying for was her professional time and advice. The report she produced made no recommendations but it clearly outlined all the options available to the person paying for the report and the considerations they should be making.

“Of course, the natural thing for consumers to do after reading the report was to go straight back and hire her to do the further work and the research. As a result, she obtained a lot of really good wealthy clients on an ongoing basis.”

However, many advisers might be fearful of going down that path because they would think they were selling themselves short, Richards suggests. “Yet her logic was sound. She thought why should I give my time for free when I can actually deliver something of value? If that makes the clients feel more confident to engage with me because they don’t feel that they have to go on and use me that’s fine. I’ve given them the benefit of my professional service; they go off happy and I’ve charged £250 for my time.”

If the client goes on and wants to use her under her normal terms of business, Richards points out, then she incorporates the initial charge as part of the service-based fee structure.

“What she genuinely wanted to do was bring the barrier to engagement down because she needed to generate new clients and now she’s got more than enough wealthy clients using her on an ongoing basis, as part of her service based long-term proposition.”

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