Steve Conley, is on a mission to change the advice landscape and I don’t write these words lightly.
You can give genuine financial advice to your clients, but without the massive PI insurance premiums and compliance hassle.
By giving what he calls non-intermediated advice. Basically, you’ll do everything except recommend a product for people at the end. Everything you do is non-regulated, because there’s no product intermediation as part of the process.
That’s a novel idea, I thought to myself, and I wanted to know more.
So I called Steve. I’ve known him for most of my 16 years living here in the UK. He hired me in 2005 for a job with a large network where he was leading a change management project. He’s an impressive guy and a true visionary thinker.
Here are some words from Steve’s website, The Academy of Life Planning, that sum up his offer to advisers.
“Do you enjoy being a financial planner? Do you want to carry on doing it?Maybe you are being forced to consider selling out your much loved boutique IFA practice to a larger firm or consolidator.
Perhaps your PI insurance premiums have gone up 500% with major exclusions, and on top of FSCS levies and compliance network fees, you seem to be paying everyone else and not yourself.
Potentially you are becoming increasingly irritated by the decisions of your compliance advisers. It seems like you can no longer put the client first and must cover your back all the time instead.
Possibly, you can end up carrying massive liabilities arising from past sales to the grave.
Imagine this. You carry on doing what you love with your own business, with a happy consolidator writing you a big fat cheque for your book. And, your new service is non-competing so you have no ‘no-contact’ clauses to worry about.
Picture this. PI insurance premiums less than £100. No FSCS levy, no compliance network fees.
Here, there’s no compliance red tape, as there are no regulations to worry about.
What if you were to deliver great client outcomes, adding huge value to your customers; you still do financial planning, without liabilities for stuff that goes wrong as a result of other people’s mistakes.”
What I like about this
After speaking with Steve directly, I get where he’s coming from. He was searching for a way to do the part of the job he loves and that adds 99% of the value; giving great strategic advice.
He wanted to avoid the frustrating, annoying, walking-through-treacle parts of the job, like:
- Having to include reems of useless and confusing crap (under the name of compliance)
- Paying for the mis-deeds of the few advisers he neither knew nor supported (the ones who make the PI premiums go through the roof – and I realise it’s only a few bad apples)
I also love the potentially disruptive nature of his model.
Will advisers flock to something like this in a revolt against the heavy-handed and often ineffective regulation handed down by the Financial Conduct Authority (FCA)?
What happens if they do? Will financial regulation cover less and less advisers giving advice? What are the implications of that?
Will savvy consumers prefer to get this type of advice and then go and purchase their own products online via a Robo platform, or direct from Vanguard?
US research I’ve seen suggests Millennials might well prefer to split the advice and product selection pieces. Does this approach play very nicely into the advice model of the coming decades?
The fees Steve and his team charge are significantly lower than the current advice model. Will that put fee pressure on existing advisers?
Where I disagree with Steve
In our conversation, Steve felt that this current round of 500% PI insurance premium increases might be the death knell for the boutique Independent Financial Adviser (IFA).
He’s got a point and I can’t sit here and say he’s wrong. Maybe it will be a catalyst for many smaller advice firms to exit the market.
But it might not be the clean-out that Steve fears.
As I outlined in a previous blog Get Better, Not Bitter, there are some reasons for optimism.
While there may be some clean-out of advice firms that haven’t been able to make the transition to building a successful business, this only creates even more opportunity for the survivors that can do just that.
If you’ve already made some serious steps along the business-building path, your competitors have to go through the same pain you’ve been through to merely catch up.
If you are one of the surviving boutique advice firms, in all likelihood you’ll be in greater demand.
What will the survivors have in common?
- They will be aiming for and achieving a 25% net profit margin.
And that’s after everyone in the business, including the owner/directors get paid a full market rate for their day job. I mean 25% of annual revenue, on top of whatever you earn for being the lead adviser and/or Managing Director in your firm.
That level of net profit is achievable with some focus and effort in the right areas and it provides you with enough cushion to survive things like 500% increases in PI premiums.
- They will have assembled a great team.
This is the number one challenge as you transition from being an advisory practice into a genuine business. It takes time and effort. You don’t just hire two or three people and you’re there.
Sometimes you’re going to kiss a few frogs along the way.
- They will have the ability to execute on their ideas.
Strategic thinking is important, but being able to put into action the ideas you come up with separates the good from the great.
- They’ll work on the right issues.
You’ve got to get the basics 100% nailed, like pricing, proposition, team, culture and values, marketing and financial management.
- They’ll become great business leaders.
This is the core skill that will allow you to operate in a permanently challenging environment.
I love The Academy of Life Planners concept and I think it’s going to have a big future.
But I also love the prospects for the best and brightest financial planning businesses too.
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