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Interview: Brett Davidson and Nick Bamford

Back in 2013 Rob Kingsbury asked
 Nick Bamford, executive director of Chartered Financial Planners Informed Choice and Brett Davidson, chief executive of FP Advance and partner of Mode FP, how advisers could tackle some of the key issues facing their firms in the year ahead


Rob Kingsbury: What does the next year have in store: will we see, for example, increased competition, more M&A, new and innovative ways of running businesses?

Brett Davidson: I think exactly what we see will depend on which segment of the adviser market we are looking at. At the top end, where people have been in shape for RDR for years and have been thriving all through the credit crunch, I think that’s where we could start to see merger and acquisition. In that space, there are firms looking to acquire client banks from advisers looking to retire and
to gain some arbitrage in the process. So M&A will be a driver in the market.

While we’re not seeing loads of innovation at present, there is no doubt that the market is ripe for it now, so I’m hoping we’ll start seeing a lot more of that, again particularly at the top end of the market.

Overall, however, I don’t think it’s so much what happens in 2013 but rather what happens in the next 2-3 years that could change the market. I think the squeeze is coming for those firms that haven’t got themselves sorted. The fact that clients can turn off renewal income and are likely to be encouraged to do so, that costs are rising, that PI is getting harder to come by, all of that is starting to squeeze the smaller firms that aren’t performing. For those types of firms I think it’s going to get tougher and tougher.

Nick Bamford: I don’t see peer-to-peer competition being an issue. I think there is a good future for firms that have a well thought out client-centric proposition and that have worked out their pricing models. 
We may see new entrants to the market, particularly
in the direct to consumer offering. I think that will present a challenge for us as advisers. We are going to need a really compelling story if we want clients to pay
us for services that they might otherwise perceive they can get for free.

RK: So how much of a threat might direct to consumer propositions be to the adviser market?

NB: I think they will be less of a threat and more of a challenge. There is a competitive element but there is also a very real difference between proper advice delivered with all the protection inherent in it for the consumer and the DIY approach to investment. As advisers we need to demonstrate that we are adding real value for the client

– and that is in the planning and advice and not necessarily in the execution. What we could find is an interesting dynamic where the client engages with the financial adviser for the planning element but then goes off and does the transacting themselves.

BD: Direct to consumer definitely is going to be the interesting development and I think within
it there is the potential for significant disruption to the market. The gap created in the middle to the lower end of the market is potentially ripe for direct to consumer offerings. And that’s not just caused by RDR, I think it’s a natural development that would have put those areas under threat in any case.

But it’s not all threat either. Often some of the best clients are those that have tried the DIY approach because they’ve found out that it’s not all that simple to do and they can become some of the most loyal clients.

RK: If a firm has it’s proposition and pricing hammered out and it is looking to take its business to the next level, where’s a good place to start?

BD: The first hygiene factor for me is whether a firm delivers the fundamentals really well. How often in our everyday life are we underwhelmed by the service we receive? Getting the basics right in any business I think is the basis for success. Once you’ve done that, then the interesting and sexy bit is how you differentiate, brand and market your proposition and take it to the next level.

NB: If you want to take things further then it’s important to know what you really do well. We went through an exercise
in our firm recently where we looked at seven very focused advisory services we offered
to find out where the demand was – where the sweet spot was for the firm. We were able to pinpoint four out of those seven areas where we felt we should be concentrating our energies both as core offerings and as a means to differentiate our service.

What we found was that not
only did we have the skills and competencies to deliver on these areas but they were the areas we enjoyed most as well. I think if you enjoy doing something then that comes across to the end user. And I agree with Brett here, it’s about getting the basics right and doing the things you’re really good at. That will then give you the springboard into other areas, the means by which you can create differentiation and put some clear blue water between your proposition and that of your competitors.

BD: And if you are ambitious and you’re doing the job right then the next stage has to be taking what you do out to more people. That’s the key challenge I see now for the firms at the top of our profession.

RK: One of the hardest elements of business management is often just keeping tabs on what is happening in the business. What advice do you have for firms in this respect?

BD: Obviously, management information is core here – but you have to know what you are looking at, what data you are capturing, because that will determine the decisions you make.

All too often the only MI captured is performance related. It’s in the past and results driven. What also needs to be captured is information that gives people insight into what might happen in the business in the future.

An athlete analysing his performance isn’t just going to look at the times he achieved, that tells him nothing. He’s going to look at things like the number of times he got to training, how many laps he did, what his diet’s been like, whether he’s recovered enough between races. That’s what’s going to tell him how to improve, not just the end times.

It’s all that kind of detailed information that advice firms need to be collecting if they are really to get to grips with how their business is running and what they can change now to help them do things better in the future.

NB: One of the changes we’ve implemented as a business and which has proved to be very effective for us, has been to separate out the function of the directors in running the business from their day-to-day work as financial planners. We found by holding structured, scheduled board meetings, run to an agenda, all the business decisions were being made in an environment where you could focus on them rather than trying to fit them around dealing with clients. In addition, as well as the finance director reporting on the finances, we’re running the meetings on a dashboard basis, with one piece of A4 paper with all the important numbers – our productivity, enquiries and marketing activity, etc – all readily accessible.

Separating out the two distinct roles is a simple thing to do and it can make a huge difference to an adviser business.



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