IFA, financial adviser, financial planner, financial coach. There are a lot of labels used by the financial advice profession, but ‘distributor’ and ‘broker’ are not among them.
Yet many asset management firms are stuck in a pre-retail distribution review (RDR) world, with titles that rankle advisers.
I tweeted two weeks ago that, at a conference for asset managers, there was a lot of talk about distributors. The tweet struck a nerve.
Financial advisers chimed in. ‘When I get an email from an old life company that is signed "head of distribution", it tells me all I need to know about how they see me,’ lamented David Hearne, director of Satis Asset Management.
Phil Billingham, director of Perceptive Planning, agreed: ‘It’s a major turn-off. Not just words, it’s an attitude of mind.
‘Many providers believe IFAs are like good little sheepdogs that go out and get clients on their behalf. IFAs think providers are like Apple or Microsoft: an expensive necessary evil to be managed.’
Asset managers take note: titles matter. Changing the language used to talk about financial advisers and sales people is good business and good for the broader profession. There are three reasons why: culture, professionalism and accuracy.
Referring to financial advisers as distributors is a sure way to turn them off. Chris Macdonald, regional business development director of Nucleus, tweeted last week: ‘I’m at a seminar where the "IFA distribution director" just referred to the room of advisers as "brokers" #fail.’
The use of dated language reveals a worrying inability to evolve. While boards of asset management firms are becoming increasingly concerned about the competitive threat from Alibaba (owner of Yu’e Bao, the world’s largest money-market fund), perhaps they should think harder about what their customers want.
Asset management is among the least trusted industry sectors. Much lip service is paid to being customer focused. Although the end-investor is the ultimate consumer, the adviser is in effect the customer. Changing titles is not superficial: it shows a cultural commitment to being customer-focused.
Great sales people at asset management firms are trained to take a consultative approach. There is a good reason for that. Sales people who rock up to an adviser’s office to flog the latest fund will have trouble getting a second meeting.
Treating financial advisers as distributors and labelling them that way tarnishes the profession and limits the ability to attract new talent.
Recent Financial Conduct Authority (FCA) figures show in 2017, there were 3% more advisers than in 2016. Though it is good to see growth, it is not increasing fast enough to meet more demand.
It is important to be crystal-clear about roles. Fund distribution is not what advisers do. After all, you are reading this column in New Model Adviser® not New Model Distributor.
In fact, many IFAs say product recommendations come at the end of the financial planning process and investors typically show little interest in the actual products themselves. What they want is the peace of mind that comes from managing their finances responsibly with an expert they trust.
Chris Macdonald followed up his earlier tweet by adding the IFA distribution director at the seminar was ‘now talking about having the biggest "distribution support" team in the UK. It doesn’t feel like it needs a huge leap of intelligence to have called it an adviser support team. At least try and pretend it’s about your clients and not you’.
Asset managers: get your act together and update your titles to reflect a post-RDR world. But dated titles are not the only problem. Revenue models for financial adviser firms are also a critical part of how they are perceived.
My challenge to financial advisers is to update charging models to reflect the value you bring to clients.
If the value an adviser offers is managing the investments, a percentage charging structure makes sense. If the value is offering financial advice, other models may be more appropriate.
Nearly three-quarters of financial advisers charge based on a percentage of assets, according to the FCA. But many firms use a variety of models. Nearly a fifth of firms charge a fixed fee and a further fifth charge an hourly rate.
In the end, regardless of the title you use, if you do not want to be treated like a distributor, do not charge like one.
Heather Hopkins is managing director of NextWealth