“Marketing is really just about sharing your passion” – Michael Hyatt, Virtual Business Mentor.
In this latest of my summer articles, I will explain why I never planned to be involved in marketing and why now, I believe that every company evolves to be so. Passion demands it.
Financial advisers, before 1996, used to be sales people. If they sold you a pension or life cover plan, they were rewarded with a commission. Most of today’s financial advisers, independent or otherwise, were created by that process but today, they are far removed from that sales driven period of time. Instead, they are rigorously vetted, regularly tested and financially squeezed to the point of near extinction.
The pendulum has moved so far in the opposite direction, there is now a huge ‘advice gap’ and as a result, an even bigger ‘savings gap’; the gap between current retirement savings and that needed for a desirable income in retirement.
According to an ‘IFA Promotion’ survey, the UK is heading for a retirement and savings shortfall of £66bn. This savings gap affects approximately 66% of the population and there is no sensible or reasonable attempt from government or the regulator to close it.
Of the fees we charge our clients for advice, less than 40% is retained by the adviser. The other 60% is absorbed first by the regulators fees and the compulsory indemnity insurances. Then by the base cost and expenses incurred in excessive administration and staffing needed to maintain an active financial advice business, and finally by the tax man, who provide very little incentive to save anymore. The regulatory rules are ridiculous.
For your protection, 60% of the fees you pay for financial advice go to the state or state encouraged associations.
The best solution would be to dilute the powers of the FCA. In particular to put a limit on the time a client can complain. I would say 20 years is a start, currently, there is no limit. While I agree with regulation, I do not agree with endless fee increases, seemingly constant policy reviews and the time consuming regulatory demands, as if their very existence depended upon it; we know it does. The fact that they allow a complaint beyond a reasonable time limit means insurances have to stretch indefinitely.
The irony is the FCA website states:
“We want customers to be able to trust that the firms we regulate have their best interests at heart by providing them with appropriate products and services. To achieve this, we have three objectives, set out for us in the Financial Services Act 2012:
- Protect consumers – we secure an appropriate degree of protection for consumers
- Protect financial markets – we protect and enhance the integrity of the UK financial system
- Promote competition – we promote effective competition in the interests of consumers
There is no doubt that we should all approve their claim to protect and encourage competition.
Their three primary objectives are more than acceptable, and very few financial advisers would argue against their sentiment. However, there has been a steady drift towards ‘over-protection’ and ‘under promotion’ in such a way that the two most relevant objectives, 1 and 3, now contradict each other.
Without a serious de-regulation (that I doubt even Boris can achieve) there is only one solution left if we are to avoid more financial advisers exiting form the industry; resulting in an even bigger savings gap, predictably towards £100bn.
Financial advisers have to move away from their cosy servicing role and seek out new clients the old way. To source them, approach them and to engage them in serious discussion about their impending shortfall, (of course, by not breaching data rules!). In essence, financial advisers today need to engage in the science of selling once again, but not the old way.
Influencing is my new word for selling. We need to influence the public to seek advice and pay for it, despite the cost. The evidence shows that a few hundred or even a few thousand pounds, independence on their financial position, for financial advice can be worth it, probably saving you far more in the long run, way more than the cost alone.
Advisers need to influence the way their clients spend and save money. To influence clients to ‘wake up’ to the realities of their own savings gap, to act now not later and to regularly invest more instead of relying on fund performance alone.
Direct and indirect marketing
This massive savings gap is why at Truly Independent, we have set out to market ourselves as available and ready to give you the advice you need. Our initial consultation is at our expense, so there is no excuse not to seek out one of our advisers in your area.
Our ‘find a truly independent financial adviser’ search engine is our latest marketing tool.
Equally, we also seek out financial advisers to join us on our quest to be the number one IFA in the UK. Of course, they bring their clients with them and we market those advisers in their town, that way we have UK coverage.
I used to be an IFA. As the company grew, I decided to hand up the advice boots and focus on adviser support. This involved recruitment of new advisers to the firm. As we grew, the management of staff became dominant until we found the management team who now run the firm on a daily basis. Now, some 10 years after launch, I spend most of my time directing and marketing the firm. We are now a marketing firm.
I have no doubt all companies will follow a similar pattern, not just IFA firms, and end up as marketing firms, promoting their own services or products.
However, I don’t just do this marketing role because it’s the direction we have gone and ended up in, but because I want everyone in the UK, no matter their own personal finance situation, to have access to a local financial adviser, who can offer financial advice that is unbiased, unrestricted, affordable and truly independent. I have a passion, I want to share it and I therefore need to market it.