Four tips to deliver a better service to clients

The best advice firms are using technology and partnering with other firms to reduce costs for the end consumer.

We have spent much of the past year visiting financial advice firms across the country, learning how they structure and run their businesses. I always learn something to help me with my own small business and leave impressed by the quality of advice businesses we have met.

We are particularly interested in outsourcing relationships – the technology and partners firms bring in to help them run better advice businesses and deliver a better proposition to their customers. In this, my final column of the year, I set out the four things quality advice businesses are doing to deliver a better proposition to their clients.

Heather Hopkins

Managing director, NextWealth

We have spent much of the past year visiting financial advice firms across the country, learning how they structure and run their businesses. I always learn something to help me with my own small business and leave impressed by the quality of advice businesses we have met.

We are particularly interested in outsourcing relationships – the technology and partners firms bring in to help them run better advice businesses and deliver a better proposition to their customers. In this, my final column of the year, I set out the four things quality advice businesses are doing to deliver a better proposition to their clients.

Heather Hopkins

Managing director, NextWealth

Reduce costs for customers

Since the retail distribution review, it has been accepted the cost investors will bear is around 2%. After advice and platform charges there is between 80 and 100 basis points left for investments and asset allocation. But good advice businesses are pushing that down further.

Using passive tracker funds in a portfolio is probably the most obvious way advisers are reducing costs for investors. The latest Investment Association data indicate a slow and steady increase in assets in trackers to around 15% funds under advice.

Perhaps more interesting is advisers pooling resources with other advice firms to consolidate the centralised investment proposition and push for lower fund charges. The Financial Conduct Authority (FCA) mistakenly called on platforms to negotiate fees on behalf of advisers in the first iteration of the investment platforms market study. Adviser platforms do not influence flows so they lack leverage.

Small and mid-size advice firms can flex their buying muscles by working collectively. Our latest research suggests only 8% of firms are doing this but the practice is gaining traction.

Advisers also negotiate hard with platforms. Some independent advice firms work with a single platform allowing them to broker a better deal than they otherwise might get. They maintain their independence by regularly reviewing the choice and making sure it is the best option for clients.

Segment clients based on needs

Most advice businesses are using some sort of client segmentation. This can be a rough and ready split by assets or the service level required. We are increasingly coming across firms taking a more sophisticated approach to segmentation based on client need or lifecycle.

In June, we found nearly a quarter of advisers have a different preferred platform for clients in accumulation compared with those in retirement. Just over half were using different providers for clients in accumulation compared with those in retirement.

This tells us a growing number of advisers are segmenting clients based on need and that is a good thing. However, the approach is often not formalised or written down.

Product intervention and product governance sourcebook rules require advisers to segment their client base. As the year draws to a close, perhaps this is a good opportunity to formalise your firm’s approach to segmentation. 

Clearly define processes and responsibilities within the firm

Business processes are not a strength for many business owners, including myself. But I have noticed well-run and professional advice firms often have clear processes and responsibilities within the firm.

Some platforms and back-office systems even allow firms to set rules and to delineate tasks in a firm. Ensuring your team has a clear understanding of their own roles and responsibilities, and using systems to support that delineation can lead to a smoother running business and reduce risk.

Create local networks with other advice firms

My final tip is to create local networks with other advice businesses. Inducement rules have made it harder for providers to facilitate these networking opportunities. But investing in a day out to meet with peers and competitors can be incredibly valuable.

I have been impressed by the communities that have sprung up on Twitter and the excellent NextGen Planners group. At a recent roundtable we organised for advisers, one said to the group: ‘I can’t think of any client I’ve taken off any of you in the past three years.’

There was agreement in the room. Working together can help us solve common challenges.

Read more: AI will soon be doing compliance for advisers

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