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Mifid II, charges & recruitment: what happened when we went on the road

Ian Horne hits the road to find out what goes into a good financial planning firm. As it turns out, the fundamentals are more important than ever: interpersonal skills, recruitment and a work-life balance.

Mifid II, charges & recruitment: what happened when we went on the road

The New Model Adviser® roadshow returned in style this year, with stops in Glasgow, Bournemouth, Chepstow, London, and a brand new stop in Manchester. With each event bringing together more than 200 advisers and paraplanners, we delivered an agenda focused on soft skills, collaboration, investment knowledge, and the fundamentals of building and growing a successful financial planning firm.

We took the opportunity to poll advisers with the same questions at each event along our route. The main revelation is 27% of advisers plan to cut clients as a direct result of the Mifid II rule (see chart below). This requires firms to provide an annual review wherever there is an ongoing fee. It seems the oft-discussed ‘advice gap’ may be getting larger.

We also asked if the Financial Conduct Authority (FCA) should switch off all trail commission on legacy products. Although 29% of advisers said it should not, a far more substantial 62% are in favour of keeping commission in certain instances. We would like to keep hearing from advisers on this issue, as it is clearly not black and white.

Finally, we asked about fees (see chart below), and whether or not advisers plan to increase fees, reduce them, or keep them the same. It seems advice will become more expensive in the next year. Our poll showed a net increase: 77% said they will keep fees the same, while 18% plan an increase. Only 5% said they would lower their prices. 

Soft skills success

From our travels across the UK prior to the roadshow, we found many financial planners were looking to place greater emphasis on building rapport and deeper understanding with clients.

To lend a helping hand, our roadshow kicked off with a presentation from professional speaker and author Warren Cass (pictured below), whose 2017 book Influence was a highly acclaimed guide to building trust and rapport.

Most planners will spend some time working on interpersonal skills. Cass provided some fantastic tips on how to take this one step further, looking at body language and values, as well as verbal and non-verbal cues. The bottom line was to pay attention to the person you are interacting with.

Cass also discussed personality profiling. He spoke about how people lean towards extraversion and introversion, as well as our propensity to focus on goals or people.

He also discussed a person’s ‘map of reality’, which relates to how they perceive the world around them, and shapes their understanding of everyday events. These frames of reference can make all the difference between whether we regard someone as confident or arrogant, laidback or lazy.

It is hard to do the session justice in writing. But the underlying point was soft skills can always be improved, and attention to detail can make all the difference between building trust and losing a client.

Cass also introduced the audience to some new software called Crystal. It assesses an individual’s character based on their social media profile and a couple of questions. To demonstrate the power of Crystal, Cass ran my LinkedIn profile through the programme and showed the findings to the audience.

I have to admit the observations were largely accurate. Although this may seem intrusive, information shared on Facebook and LinkedIn is already routinely assessed by some employers prior to job interviews. Be careful what you (over)share.

Asset allocation plans

This year’s roadshow took a broader view of the economy and markets. Speakers from Smith & Williamson, Sarasin & Partners, Orbis, R.C Brown Primary Opportunities and GAM Investments provided engaging presentations. Considering the mature phase of the bull market we find ourselves in, these sessions were met with a captive audience.

We also asked advisers for their asset allocation plans for the coming year. In terms of equities, advisers are looking to increase their global and emerging market exposure. In the bond market, they are looking to corporate bonds and emerging market bonds for value.

A substantial 40% said they were looking to increase exposure to mixed assets. Sustainable investing was a big talking point at our annual conference in January, and 28% of roadshow respondents said they would increase allocation towards ethical or positive impact investments. 

Collaboration is key

A brand new feature to this year’s roadshow was a financial planning case study session, put together in collaboration with the Personal Finance Society. The aim of these sessions was to encourage debate and collaboration between planners and paraplanners from different backgrounds and businesses.

As such, I was encouraged to read the following feedback. Advisers said they had ‘significant conversation’ about ‘different solutions and ideas’. One ‘adviser in training’ said it was valuable witnessing ‘how other more experienced advisers tackle complex scenarios in their own way’.

The session did not expose any major gulfs in professionalism or knowledge. Instead, people offered different perspectives relating to their own values and judgements.

This became more pronounced when it came to gifting and inheritance tax. In that respect, it could be argued the central distinction between advisers is the personal touch.

Our roadshow finished with a panel debate on how to build a successful financial planning firm. Michelle Hoskin (pictured above), founder and director of Standards International, was joined by leading IFAs from each region for five lively discussions about the opportunities for advice businesses, as well as the challenges that can stop firms from achieving their potential.

Hoskin is known for delivering honest opinions. She did not disappoint. She shared her experiences of working with IFAs across the UK and helping business owners take back control of their firm’s future. 

From the five debates, it became clear a major stumbling block for IFA owners is they are trying to ‘wear too many hats’ at once. It is understandable the owner of a one-man band might be the sole adviser, compliance officer, head of marketing operations, and so on.

But it appears many struggle to let go of the reigns when the business grows. As a result, they often find themselves swamped. This limits the business and also has negative consequences closer to home.

Having heard stories of advisers being given ultimatums by their spouses (‘spend less time working, or else’), this is clearly something that needs to be addressed.

Topics of debate

The answer in many cases, said the panel, is the common mantra of working on the business rather than in the business. It is straightforward advice, yet many ignore the warning signs.

Another piece of advice the panel gave is to ensure the right people are in the right jobs, and deadweights are removed from the business. The latter is undoubtedly a tough task. It was agreed this scenario is more common than most advisers would admit.

‘Process’ was a word that received a lot of airtime. In short, high standards and repeatability are essential for any firm looking to scale up. There is value in placing a firmer structure around the informal values and attitudes that create a company’s culture.

Recruitment also proved a popular point of conversation. Hoskin noted the dearth of paraplanners available, relative to the abundance of adverts for the role. Consensus was the firms who succeed in recruiting will be the ones who offer career progression, structure, proper career paths and attractive pay.

Each debate provided valuable perspectives, and we would like to thank the following people for their on-stage contributions: In Manchester, Olivia Bowen (Castlefield), Kusal Ariyawansa (Appleton Gerrard) and Sarah Elson (Berry & Oak). In Glasgow, Ailsa Brown (Gilliland Neilson Brown) and Mike Carter (Johnston Carmichael Wealth). In Chepstow, Stephen Ng (Create Wealth) and Martin Brown (Continuum). In Bournemouth, Hannah Pendlebury (Lawrence Clarke) and Mike Godfrey (Cube Financial Planning). In London, Jacqueline Lockie (CISI), Anna Sofat (Addidi Wealth), and Amanda Mayes (Capital Asset Management).

Thanks also to Michelle Hoskin and the Standards International team for your contributions throughout the roadshow. 

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