The light at the end of the tunnel or the front of an oncoming train?
The pathway to a business model that can flourish in the post RDR world is a bit like travelling on the rail network during bank holiday weekend – you know where you are going, but not how you are going to get there (or when!).
Many firms are now addressing the core building blocks of client segmentation, planning services and client engagement. This can be a real challenge which could ultimately necessitate a route and branch review of how a planning firm is structured, its cost base whilst aligning existing skill sets to effectively separate the value proposition away from transaction.
This evolution offers many exciting opportunities to differentiate. For example, a growing number of planners are beginning to embrace a wider interaction with their clients by integrating “life-planning” techniques into their advisory engagement. This is an interesting area of the market as it is based on a high level premise that by approaching the planning process at a more personal “human” level there is a deeper understanding of a client’s goals and objectives – coupled with their underlying motivators and drivers. It also switches the emphasis away from purely financial goals in favour of milestones that have a greater resonance with a particular individuals own belief system. It remains to be seen if this school of thought becomes the preserve of the boutique planner or whether more firms show an interest. Many firms have reviewed their own unique value-chain as a consequence of the FSA’s TCF initiative and seen the merit in building a more robust and consistent delivery process to support their activities. Indeed, in this respect it could be argued that a more significant step has been taken towards the sustainable and “efficiently” competitive profession that the FSA envisaged at the start of the RDR debate than may be achieved by examination proficiency in isolation (although, clearly, this is an integral part of the bigger picture).
Of course, we may find ourselves in a very different environment in three years time. The successful businesses will be those who anticipate trends and ultimately prove to be the most responsive to these. A fascinating development will be in the push/pull between distributor and manufacturer. One possible scenario is that advisers take greater control over investment decisions as opposed to guided architecture via product providers in order to deliver sufficient differentiation to their proposition. For example, in an unbundled world, if investment solutions become homogenous (large numbers of advisers using identical or similar model portfolios) then a potential outcome is that the key differentiator becomes price. This could be sufficient incentive for innovation on the part of advisers. To this end we could see technology being applied in many different ways, ranging from the full adoption of an open architecture wrap as integral to a business proposition through to the vertical integration of different platform solutions supporting defined service segments.
The imagined future of Independence as outlined by the FSA in June has a very wide scope. Against this backdrop, it seems a strategic pre-requisite that the delivery mechanism and platform functionality that supports any progressive and scalable business is able to accommodate this.
By John Porteous, Head of Distribution, Macquarie Bank International