Will the future independent financial adviser concentrate only on those clients who come with the label ‘High Net Worth’?
This was the subject under debate at the LIMRA forum in London this afternoon.
Nick was one of the key speakers at the session and he explained to the audience the challenges that the IFA sector is faced with in delivering the services to those clients who need independent financial advice.
Peter Jolly of the Association of British Insurers shared the astonishing fact that the cost before profit of an IFA providing advice on one product to a consumer is some £670 and that figure excludes the cost of delivering the advice (such as travel and face to face meeting time).
On average the typical IFA spends some 7 ½ hours preparing the paperwork, doing the research and documenting the advice to be given.
This is clearly crazy but to some extent this cost has been ‘hidden’ behind the commission payable to the intermediary who delivers product based advice. What the client really wants to pay is closer to £50 for this service.
Nick explained that it was this high cost coupled with highly variable outcomes that meant the IFA sector needed to evolve or run the risk of extinction.
His favourite line remains “change isn’t death, fear of change is death”.
Nick explained that the forward thinking IFA will continue to focus on the financial planning, advisory and wealth management needs of high net worth clients but that they would find more cost effective mechanisms for delivering good quality advice to the “mass market”.
Key to the IFA continued dominance of the mass market will be the use of the Internet.
Driven by growing Social Media trends, IFAs will find that they can deliver advice on-line without the costs associated with the desirable but costly face to face route.
IFA firms will segment their clients but, unlike the doom and gloom merchants who predict an inability for the typical UK financial services consumer to access advice, Nick believes advice will be delivered in a different way in the future.
Sure there will be competition from the banks and an emergence of new style direct sales forces as well as employer sponsored advice clinics but is only the IFA with a weak proposition that need fear the change that the market is about to witness.
