What Elton John can teach financial planners about building a business
I've always believed that running a financial planning practice is a hugely satisfying career. You see how planning changes lives, you create career opportunities for others and, if you get it right, the financial rewards are attractive too. That said, it's hard work for financial planners.
During the start-up phase there are times when you will need to roll up your sleeves and get your hands dirty. For example:
- The website needs updating
- Portfolios need rebalancing
- Withdrawals need processing
I'm sure you will recall similar occasions when you got involved with tasks which weren't the best use of your time, but nevertheless needed doing.
That's fine for a start-up, but to scale a business it's vital that the founders recognise when it's time to start delegating. If they don't, their business won't grow. Worse, a founder's inability to delegate could choke a business' growth.
Maximise your talent
Someone once said to me only partly in jest: Elton John doesn't polish his own piano. That's true - instead, he focuses on what he's great at: entertaining an audience and putting on a show. He doesn't even write all his own songs, having brought in the expert lyricist Bernie Taupin to collaborate on that task.
In other words, Elton John recognises where his talent lies and focuses on maximising that, delegating everything else.
That's exactly what you should do as a financial planner. Understand where you add value, then delegate everything else.
According to a Cerulli Quantative Update, financial advisers spend up to 41% of their time on admin and office management tasks. That's around 15 hours a week where they are not advising clients and not generating income for the business.
Assuming an hourly rate of £150, that's more than £2,000 a week of lost income doing tasks which might be better delegated elsewhere.
Consider that, according to PayScale, the average hourly pay rate for a paraplanner in the UK is just £12.20. The average office administrator earns £8.33 per hour. It's easy to see where there are potentially significant savings to be made in delegating some of your admin workload.
You might decide that your value is in winning new business, developing client relationships and financial planning. Consequently, other functions such as marketing (it's different from winning business), administration, paraplanning, operations, compliance, and investment management can all be outsourced.
Getting this right will help your business thrive, but it isn't easy. You will need to empower your team to make decisions, build good habits of your own and develop the discipline to focus on where you add value.
Measuring success
How do you know if you're making progress?
There are various benchmarks you could use; assets under management, turnover, and profitability immediately spring to mind. However, why not focus on the number of hours you are billing?
This is the method used by our peers in the accountancy and legal professions. It also works irrespective of how you charge. Essentially, you are measuring the amount of time and proportion of your working week which generates revenue or is focused on building the business.
By creating a baseline and then reviewing each week you will understand the progress you're making.
What next?
Here at Beaufort Financial, we talk about the value of letting go to take control. So, how do financial planners do that?
There are several stages:
1. Understand where you add value
Start monitoring your activity and the time taken on each task for a few weeks. Then, look back at everything you've done and create three lists:
List 1: The tasks only you could do, which add genuine value
List 2: The tasks which could have been completed by another member of your team
List 3: The tasks where technology could have saved time and money
The tasks on the first list are those you should focus on. To do that though you will need the right team in place, which might need you to…
2. Consider your mindset
We encourage financial planners to think of their support team as an investment, not a cost.
We've all seen firms with planners managing relatively large client banks/assets and wonder how they do it. Invariably the answer lies in the support or back-office team with a high ratio of support staff to planners; both employed and outsourced.
These business owners understand that building a team isn't a cost, but an investment which allows the planner to maximise the proportion of their time spent generating revenue or building the business.
This is especially important if you're approaching retirement. With the most recent Heath Report finding that the average age of an adviser is in their mid-50s, you'll need to build a good internal management team in order to either pass on or sell the business when you retire.
If you've got the mindset that your support team is a cost and not an investment, this needs to change.
3. Embrace technology
There are many manual processes which can be completed more efficiently and cost-effectively by technology. We often see planners and their support teams completing tasks which could be done just as effectively by apps or other software.
4. Outsource if necessary
You will, no doubt, be responsible for tasks which don't generate revenue or help you grow the business and that you don't have anyone you can easily delegate them to.
Examples of such tasks include:
- Compliance
- Case reviews
- Training and competence
- Marketing
- Investment management
These tasks are vital to the growth of your business but probably not in your core skill set. They are best outsourced to experts.
That's where we can help.
At Beaufort Financial we understand that for your business to flourish financial planners need to let go to take control, which is why we provide an outsourced solution for all the above.
Regards
Simon Goldthorpe
Executive Chairman, The Beaufort Group
The final blow to Final Salary transfers?
It was over two years ago when I first wrote about Final Salary transfers. Plenty of water has flowed under the bridge since then, including the British Steel debacle and the significant mis-selling of SIPPs.
However, the increase in the Financial Ombudsman Service (FOS) compensation limit has delivered a potentially fatal blow to some advice firms. It will also impact consumers at a time when high-quality advice has never been more important.
What's changing?
The FCA's Policy Statement PS19/8 states:
- on 1 April 2019, the ombudsman service's £150,000 award limit will change to:
- £350,000 for complaints about acts or omissions by firms on or after 1 April 2019
- £160,000 for complaints about acts or omissions by firms before
The FCA believes that only around 500 high-value complaints will be affected with 75% of these covered by the new limit. The new rules will affect both consumers and advice firms:
Advice firms
During the consultation period insurers suggested that the change would increase PI premiums by 200% to 500%. FCA figures show a 500% increase would push the average premium (for a 2 - 5 adviser firm) from £3,400 to £20,100, cutting profit margins by 80%. If this happens, it is likely that many firms will give up their Pension Transfer permissions.
The FCA believe this is a 'worst case' scenario, instead it predicts increases of around 140%, pushing the average premium to £8,000 per year.
There is a possibility that the regulator is being conservative in its estimates of both the average PI premium and the likely increase. However, even if they are correct, a 140% increase will still see margins fall by 23%. That would have a significant impact on most advisory firms.
It isn't just the cost of PI insurance which this will affect. The terms and conditions are likely to become more restrictive. For example, I saw a financial planner post on social media that his renewal excludes members of the British Steel pension scheme. This is a worrying development for both advice firms and consumers.
Consumers
Transferring away from a Final Salary scheme (assuming the value is above £30,000) is the only area where the law forces consumers to seek financial advice. The market, therefore, needs to function efficiently, with enough advice firms to meet demand and services priced fairly to all.
The FCA doesn't believe the worst-case scenario will happen. But, it acknowledges that if it did up to 1,000 'higher risk' PIFs (personal investment firms) could stop providing DB transfer advice under a £350,000 award limit because they would be unable to afford the PII cover.
This would leave around 1,500 firms with pension transfer permissions. Although the FCA believes this will meet demand, I question whether that would be the case.
It's also logical that higher PI costs will be passed on to the consumer in the form of higher advice fees. An increase which will be compounded if demand exceeds supply.
Finally, if scheme specific exclusions become widespread, we could see some consumers finding it even harder to find advice.
The possible result?
A large increase to PI premiums, or a tightening of policy terms, poses an existential threat to Final Salary advice. This would undermine Pension Freedoms and could create a two-tier system.
Naturally, if poor advice means compensation is due then it should be paid. I'm also in favour of simplifying the current system, so 'high-value' complainants can seek redress via the ombudsman rather than taking costly legal action. In fact, I'd go further, reforming the whole system; in what other profession do those giving good advice have to meet the increasing cost of other's misdeeds?
However, the law of unintended consequences means the increased limit, which the FCA themselves suggest will only help a few hundred consumers each year, could cause significant harm to the very people the ombudsman seeks to protect.
My concerns are well documented; PI premiums rising, advice firms retreating from the market and consumers left unable to find (or afford) advice.
Time will tell whether this will be the case. In the meantime, stay close to your insurer, communicate with them regularly and ensure they help to design your processes. That's what we've done for years at Beaufort Financial and exactly what we'll continue to do.
Regards
Simon Goldthorpe
Executive Chairman, The Beaufort Group
Nine things which make the ideal network
As you probably know, the Professional Adviser awards took place earlier this month. One of the categories is 'Best Network,' whilst we were highly commended by the judges this year, it got me thinking, what actually makes a good network?
The answer will be different depending on who you ask. But the first decision perhaps isn't which network to join, but whether the appointed representative or directly authorised route is most appropriate. If we assume you choose the network route when faced with a myriad of options what does 'good' look like and what should be top of mind when weighing up the options?
I suggest there are nine.
1. Stability
A network's first job is to provide a stable home for its members from both a regulatory and financial perspective.
Look for a network with a healthy balance sheet with minimal debt. If its accounts show losses, I'd want the reason to be reinvestment into the network rather than trading losses.
From a regulatory perspective, are there any past or pending enforcement actions and have restrictions been imposed on their regulated activities? Also, the history of their PI renewal can be a great barometer of a network's 'regulatory health'.
2. PI Insurance
The Professional Indemnity (PI) market is getting tougher. Many firms are facing higher premiums, larger excesses and onerous restrictions on renewal. Some are struggling to renew their cover and it's unlikely this will change any time soon.
When shopping for a network, find out how their systems and controls will help your business weather the current PI storm and the steps they take to stay close to their insurer, as well as specific policy terms and premiums.
3. Compliance Support
At a basic level, a network's role is to help a business manage risk while removing the burden of dealing directly with the FCA. Having compliant processes to follow will lighten the load for many. However, not all networks' compliance support is of equal calibre. Be clear about what your business will receive and the expectations that sit with you and your team.
4. Ownership
It's vital to understand both the ownership structure of a potential network and how this might affect future decisions.
The trend for investment managers to control the value chain from advice to investment and platform creates potential conflicts of interest. Of course, vertical integration might not create concerns. But first, understand a network's ownership structure and the potential implications it has for your business and your clients.
5. Culture
The culture of your business and the network must be closely aligned. A collegiate relationship where the network welcomes input from the appointed representatives and vice versa is valuable. Pick the phone up to existing members (they are easy to find via the FCA register) and explore whether the sales pitch is reflected in reality and their day-to-day experience.
6. Support
Each business will have its own unique requirements. Some appointed representatives want help to grow their business which may include financial support, business development or marketing. Others require assistance with technology or removing the burden of investment management. Find a network or partner that is aligned with your needs.
7. Independence
We are big supporters of independent advice. It still resonates with consumers and is helpful for those working with professional connections. Consider carefully whether the network is truly committed to remaining independent.
8. Fees
Focus on the value received rather than the fees to pay. At some stage, when the other boxes have been ticked, you need to agree on commercial terms. I'm looking for fairness and to put the current charging structure into context, by understanding any recent changes to the overall financial position of the network.
9. Exit Terms
Before signing on the dotted line, understand the terms under which you will be able to exit should the need arise. This starts with reading the contract (something too many advisers fail to do); look out for excessive notice periods, the retention of fees and other onerous exit terms.
Due diligence should be broad. Get reassurance that the network has the capacity to process any exit efficiently to avoid you being held in limbo. Talk to firms who have left the network to understand their exit experience. It speaks volumes about the network if they part as friends.
Conclusion
What makes an ideal network is a personal question. There's no one-size-fits-all solution, which is why the range of options currently available is positive.
But getting it wrong can cost. Worst case it can impact turnover while curtailing growth. Take your time, look past cost and make a carefully considered decision.
If you are currently considering an alternative network, we'd love to find out who you are and where we might be able to support your business.
Regards
Simon Goldthorpe
Executive Chairman, The Beaufort Group
Eight things essential to scaling a business
The start of a new year is a natural point to take stock and plan for the year ahead. Even if your financial year starts in April, it's never too early to start thinking about what you want your business to achieve in the coming months, and more importantly, how.
What do you want to Achieve?
It starts with defining your goals; setting out the ambitions and putting a stake in the ground so you can build a road map of how to get there.
For some, 2019 will be about keeping the ship steady; dealing with any fallout from Brexit, charting choppy investment waters, retaining clients and managing overheads, and delivering a compliant and excellent service profitably. For others, I'm willing to wager that 2019 will be about growth, or at least putting the building blocks in place to deliver growth in the coming years.
Are you Ready for Growth?
If growth is on your agenda, you need a clear vision of what you can realistically achieve. Growth generally means increasing the number of clients you have, increasing the fees you earn from them, or ideally both. Either way, be certain that growth will deliver additional profit and not just turnover.
At the same time, you need a strategy for retaining existing clients; there's little point throwing efforts into recruiting new clients through the front door if existing ones are exiting stage left. Most advisers and planners I meet rarely lose a client. However, that doesn't mean structures to deliver exceptional service shouldn't be reviewed regularly.
Options for Upscaling
There are four main ways to grow your business, none of which are mutually exclusive:
1. Take on more advisers and planners, either on an employed or self-employed basis. This will increase the capacity of your business to service more clients, although fully-qualified financial planners are in short supply and high demand.
2. Invest in building a structure to support key advisers and planners, who are usually the business owners. The support team, which will include compliance, marketing and paraplanning, becomes the 'engine room' of the business, allowing the advisers and planners to take on larger numbers of clients.
3. Grow your own talent by investing in training and development. This is a much slower, but arguably more solid way to build a business. It also requires a vision which is easily understood by staff and shows them a clear career path.
4. Developing back-office systems to increase efficiency. Most of us have invested in IT and software for data and client management but how often do I hear this familiar phrase 'we only use a 10th of what it can do'? Most of the off-the-shelf have capabilities that can transform a business but require time and a will to exploit them. I do believe that the majority of businesses seriously under-utilise their resources.
The Foundations for Growth
Having determined that you want to upscale your business, decided how much you want to grow by and when, there are eight essential foundations to put in place:
1. A common purpose: Everyone involved in your business needs to get behind the same mission. Both your employees and suppliers need to understand where you're heading, the importance of their contribution, and how they will be rewarded.
2. Core values: These are linked to a common purpose and needs to be embedded in the business to ensure your employees understand who you are and what you stand for.
3. Proposition: Does everyone in your business know what you do and who you do it for? Do they know how they will give clients a great experience? However, a client, prospect or professional connection engages with your business, they should receive the same message and treatment, whoever they encounter. One weak link in the chain can be extremely damaging. It's essential that everyone 'gets it'.
4. People: Whilst technology enables your business to work more efficiently (and potentially open new revenue streams), any advisory firm seeking growth needs people. So, do you have the right people with the right skills (including suppliers) on board? What do you need to do to attract the people you need to grow? Do you need to invest in training enhanced employee benefits, or perhaps tweak some of your processes to make flexible working more feasible? All of which will aid recruitment of the right people.
5. Finances: Your business is based on helping clients create a financial plan, so where's yours? Do you know your key numbers and have processes in place to produce them? You will need them for monitoring your planned growth (see 8, below). Be honest about the quality of your own management information.
6. Risks: No business is immune to risk, particularly in a heavily regulated industry. Some are external and largely out of your control. But, others are internal and entirely within your control. The key is to recognise the key risks and put plans in place to mitigate them, or at least minimise their impact.
7. Marketing: Your business is unlikely to grow if you don't increase your client base. Once you have the operational infrastructure to service more clients you need a strategy for both retaining the ones you have and winning new business.
8. Monitoring: Do you have the right reporting structures in place? Are you taking the time to actively review the numbers and act if they're not what you expect? Winston Churchill is credited with saying: However beautiful the strategy, you should occasionally look at the results. Even if he didn't say it, it still holds true; a strategy is all well and good on paper, but the execution of it still needs to deliver on the goals that you set in the first place.
All of this sounds simple. But simple isn't the same as easy. And it isn't easy to find the time and resources to deliver on everything needed to power growth.
And here's the advert...
Play to your strengths, if it's not your core service, outsource it. At the Beaufort Group, we encourage our partners to 'let go' of the tasks that don't add value, so that they can 'take control' of their business growth. If you do no other planning this year, perhaps consider the tasks that you could let go of in 2019.
Regards
Simon Goldthorpe
Executive Chairman, The Beaufort Group
Reasons to be cheerful in 2019
2018 was another year when our profession demonstrated its resilience and ability to cope with waves of change and seismic challenges.
It started with MiFID II and was followed closely by GDPR. Both now seem a distant memory. But the impact will reverberate through the way we work, and give advice, for years to come. And, that's before the full effects of PROD are felt.
GDPR and MiFID II aside, other challenges emerged. Pension transfers and their impact on the Professional Indemnity Insurance market being particularly worrying, coupled with increased market volatility.
But with 2019 fast approaching, what might be on the horizon for our clients and our profession? I see several concerns and threats which may well trigger a wakeful moment at '3.00 am':
Brexit: At the time of writing, the Brexit fog hasn't lifted. The uncertainty is damaging. Brexit could turn out to be equivalent of the Millennium Bug and dissipate quickly or, pose a lingering threat to investors and businesses alike. It's impossible to know. What we do know is that firms need to remain vigilant and nimble, ready to react to the final outcome.
Market volatility: Increased market volatility will continue into the new year. It's during these periods that the work you do for your clients comes into its own. Coaching them and managing behaviours help clients understand investment fundamentals, remaining invested in the knowledge that short-term volatility is the price they pay for long-term investment returns. The threat, of course, comes from the financial media, which trumpets loudly about large (and temporary) falls in stock markets.
The tightening PI market: A heightened regulatory focus on pension transfers, coupled with a proposed increase to compensation limits, mean that PI insurers are becoming increasingly nervous. This translates into a tightening of the market with firms seeing premiums rise, restrictions imposed, and excesses increased. It's a worry and poses an existential threat to some advisory firms, which in turn, could further widen the advice gap.
Despite these threats, we can be positive about the future. Not least because of the increased levels of professionalism and the undoubted need for advice. It's somewhat frustrating that we've collectively failed to crack the trust issue; possibly the most enduring of all the threats our profession faces.
You know the value you add to your clients. You see how financial planning changes lives. Indeed, the FCA's Financial Lives survey shows that while only 6% of adults in the UK have taken regulated financial advice in the past 12 months, 25% need it. That's over 12 million people who aren't getting the advice they need.
Why? In part, due to a lack of trust.
The same survey shows 42% of adults lack confidence in the UK financial services industry. While our own YouGov survey from earlier this the year showed that a lack of trust was a key reason those over 55 don't seek or take up financial advice. In 2019, the issue of trust is a threat but also an opportunity.
Tackling trust issues means going back to basics. We must communicate the benefits of financial planning to those people who need it. As well as demonstrate the good we do and how advice helps those who receive it achieve their aspirations. Indeed, at a time when pension transfers and freedoms offer greater threats and opportunities to consumers than ever before, never has there been a greater need for the services you offer. Communicating is one thing. Doing it in a way to ensure people listen is another. A thought for another day.
Some of our highlights from the past 12 month, include:
Beaufort Financial:
- Welcomed seven new partner firms into the group across the UK
- Raised over £20,000 by completing the Three Peaks Challenge
- Supported the next generation of planners with St Helens office recruitment of apprentices
- Listed in the New Model Adviser and FT Adviser top 100 firms
- Shortlisted in the best Network category at the 2019 Professional Adviser awards
Beaufort Investment:
- Built funds under management approaching £1 billion
- Continued to support The New Model Business Academy
- Emma Clarke shortlisted for 'Fund Analyst of the Year' in the Women in Investment 2019
- Shortlisted in the best Model Portfolio Service category in the 2019 Professional Adviser Awards
All that remains is for me to wish you a Merry Christmas and ask you to commit to doing everything possible to improve trust in our profession as we head into 2019.
Beaufort Group finalist in prestigious best network category - Professional Adviser Awards 2019
Beaufort Group has been a named finalist in the 'Best Network' category of the Professional Adviser Awards 2019.
Entries were taken from every corner of the industry and finalists are selected as standout examples of firms helping to move the industry forward.
Simon Goldthorpe, Group Executive Chairman commented: We have seen significant change in business, with seven new partners joining in the last 12 months - our fastest growth to date.
What's important as we grow is sustaining a razor-sharp focus on our clients. Being a finalist in the best network category tells us that what we are doing with our partners and clients is really working.
Now in their 14th year, the awards recognise the best adviser firms in financial services, along with the best in multi-asset investing, platform provision, adviser support and client engagement as well as crowning the Paraplanner of the Year and Adviser Personality of the Year.
The winners will be announced at an awards ceremony on Thursday 7th February at The Brewery, London.
'Tis the season of goodwill, but how much time and money should you devote to good causes?
Every December I get countless emails with similar messages: We aren't sending Christmas cards this year but are making a charitable donation instead.
You'll no doubt receive many similar emails.
Now, I'm no Christmas Grinch, donating in lieu of sending Christmas cards is perfectly sensible; it's good for the environment and raises much-needed funds for good causes. However, I'm always left wondering whether this charitable spirit extends to the other 11 months of the year
I've always been a firm believer that businesses should do good. Not just for their employees, clients and themselves, but also for the wider community. Over recent years this has become known as Corporate Social Responsibility (CSR). Confusingly, there doesn't seem to be a definitive definition of CSR, even the Financial Times is quoted as saying: CSR is a concept with many definitions and practices. The way it is understood and implemented differs greatly for each company and country.
However you choose to define CSR, at its heart is a belief that business should be about far more than just profit. Naturally, profitability drives sustainability, without which businesses couldn't provide opportunities for employment, progression and learning. But as we approach the third decade of the millennium, business must take responsibility for the community of which it is part, its effect on the environment (both locally and globally) and the people who help it succeed.
Practising what we preach
I'm delighted that so many people at Beaufort Group take social responsibility so seriously.
This year saw some intrepid members of our team raise £20,000 for the Dreams Come True charity by completing the Three Peaks Challenge. They trained hard, bonded over blisters and other assorted injuries, promoted the event online while inviting clients and suppliers to join them on the challenge or support with a donation.
The result?
A significant sum of money which has been used to bring moments of joy to children with serious and life-limiting conditions.
The same spirit has been embraced throughout Beaufort Group; over the past year, our partners and their teams have supported numerous grass-roots charities and community projects, including:
- Our Reading team, who support Ark Cancer Charity with members of the team participating in the annual Ark Riders cycle challenge. They also host an annual fund-raising professional connections pub quiz and this year completed a sponsored abseil from the Spinnaker Tower.
- Our Mansfield team who during the past few months have raised £400 for When You Wish Upon a Star.
- The Group has donated over £6,000 to The Dream Factory, a charity aimed at making the dreams of children and young people with life threatening and limiting illnesses come true.
- Our Birmingham team sponsors a cycling team.
- And, finally, Mark Cooper from our Taunton team took the unusual step of growing, perming and then shaving his hair, all in aid of Make-A-Wish!
The money raised for good causes is the most obvious result of these endeavours. However, there are numerous other benefits:
- It shows a human side to our business, which clients and prospects can easily relate to
- It aids recruitment; research has shown that many people, particularly millennials, are increasingly attracted to working for businesses which demonstrate ethical and community-minded practices
- Research has also shown that many consumers consider CSR as an important factor in their decision-making process
- Internally, the events have certainly been positive for building our teams creating new relationships while strengthening others
- They can also be a great opportunity for junior members of the team to take the lead; allowing them to develop their project management and communication skills while getting to know colleagues throughout the business
There are of course potential pitfalls to be aware of:
- You still have a business to run and won't help anyone if your CSR activities mean you take your eye off the ball
- There's only so much time your team can commit to CSR without it having a detrimental effect on your business
- Having said that, writing a cheque and throwing money at CSR isn't necessarily the answer either. It won't help you build a stronger team, nor will it provide you with significant profile-raising opportunities
- Charity fatigue; if everyone in the firm is asking for sponsorship, you and others will get very annoyed, very quickly! Far better to be strategic and inclusive; asking members of the team to help pick the charities you support and the activities you undertake will get far greater 'buy-in'
- Inevitably once your activities hit the headlines other charities will approach you with requests for support. That means you'll spend quite a lot of time (politely) declining their invitations; this can be both time-consuming and soul-destroying even if it is unavoidable
Lessons learned
To help avoid some of these pitfalls and benefit from some of the lessons we have learned, can I finish by offering these five quick tips?
- Include as many members of your team in the decision-making process; from the apprentice to the Managing Director, your CSR efforts will be far more effective if everyone feels that they have been listened to
- Put policies in place to clearly state the charities you support, the nature of that support and for how long it will last for
- Agree on assessment criteria for what constitutes CSR, marketing and HR; this will help you understand the commitment you are taking on and what you can hope to gain. It's equally important to acknowledge that some activities are just about doing good. There might be no marketing or business benefit. And frankly, there's nothing wrong with that
- Don't let your passions take over by assuming that just because you're enthusiastic about a cause everyone else should be; you will only risk alienating your team
- If now isn't the right time to develop a fully-fledged CSR policy, pick one thing and follow through with it (even if it's just donating at Christmas instead of sending cards). That way you will show that you are human and caring but that you also have set your parameters for what you will commit to
It's all about finding a balance; with the good you can do on one side, balanced by the time, money and resources you commit on the other.
Whatever you choose, whether you call it CSR or 'just doing good', I'd encourage you to think carefully about the positive impact your business can have on others. And, as the adverts used to say: It's not just for Christmas!
Juniper Wealth Management joins the Beaufort Financial partnership
Juniper Wealth Management of Preston has joined Beaufort Financial, the national partnership of independent financial advisers as an appointed representative. Juniper was founded in October 2018 by Jon Doyle, who has 10 years' experience in the financial services sector. The firm employs one administrator and a part-time marketing manager.
"As with many small IFA firms the cost and practicality of becoming directly authorised with the regulator is prohibitive." explains Jon Doyle. "Specialist firms like us with a core client base of small business owners, professionals such as dentists and doctors, high net worth families as well as charities and trusts, need to outsource the fundamental day-to-day regulatory and compliance functions to experts.
"I looked very carefully at a number of networks but found that Beaufort Financial's ethos matched my own. I was particularly impressed with the Beaufort culture, the use of technology and the PI cover, backed up by the quality control processes. Quickly we found that we were on the same page; being client centric is paramount.
Beaufort Group's Executive Chairman, Simon Goldthorpe added:
"Our partnership includes small and larger firms, established firms and start-ups. We offer the support that a new and aspiring firm needs, but also the flexibility to allow firms like Jon's to fledge at their own pace.
"We now have 17 member firms in the partnership. This year we have welcomed five established and new firms
WLS Financial Services launched with Beaufort Financial
A new appointed representative firm of Beaufort Financial, the national partnership of independent financial advisers has been formed. WLS Financial Services is a joint venture with Wills and Legal Services Lt, a national paralegal firm based in Malvern. Founded in 2011, Wills and Legal specialises in will writing, setting up powers of attorney and trusts. Jason Lloyd, formerly of Stirling House and Blackfinch Investments, has been appointed to head up the financial advice business.
WLS Financial Services plans to recruit a team of national financial advisers to work alongside the 25 existing legal paralegals that advise some 120,000 private clients in England and Wales.
Commenting on the news Jason Lloyd, Director of WLS Financial Services said: We have an established paralegal business with ambitious plans. Rather than outsource financial planning to third parties, which is what most firms in our sector do, we established our own professional and independent financial planning arm. This is in the best interest of our clients and enables us to offer a full range of services to our client base.
In Beaufort Financial we have found the ideal modern and forward thinking partner. Maintaining whole of market independent status is a necessity and will be fundamental to the success of the business.
WLS Financial Services has appointed two financial advisers. Karen Pincher, a chartered status wealth manager joined from Meritor Financial Management and Deutsch Bank, whilst Hazel Carter, an equity release specialist joined from the Right Equity Release. Previously, Hazel was at Just Retirement.
Beaufort Group's Executive Chairman, Simon Goldthorpe added:
Partnering with an ambitious paralegal firm makes a great deal of sense to our Group, whilst our partnership structure clearly does appeal to Jason, his colleagues and most importantly the clients. We look forward to working with Jason to grow the business.
Outsource to move your business forward
Most financial advisers and planners want to grow their business. Increasing turnover, assets under management, client numbers or net margins are all typical measurements. Naturally, objectives and goals will differ from firm to firm and only you will know the right combination for your business.
Irrespective of how you choose to measure growth I often wonder what separates the advisers and planners who achieve their goals from those who don't. The ability to attract new clients is certainly one of the key ingredients. So is recruiting, retaining and training the right members of the team. I'd suggest the third element is a laser-like focus from the business owners.
I'll resist the temptation to trot out the tired old cliches. If I never hear 'only do what only you can do' again I'll die a happy man! However, while cliches, they are nevertheless true.
That's why I believe that to successfully grow a financial planning practice, business owners should concentrate on two things:
- Their clients (assuming they continue to advise, not all business owners do)
- Business development / growth
In my view, everything else from investment management to HR, marketing to compliance, is a candidate for outsourcing, giving you time to focus on these two elements.
The benefits of outsourcing
For me, there are two key benefits to outsourcing; it frees up time and gets a true expert on the case.
In a vain attempt to save money I often see business owners attempt tasks themselves rather than outsourcing. This usually results in the task being completed to a lower standard and taking longer to finish than if it were outsourced.
It's a false economy too; while outsourcing will increase costs, it frees up billable time for the adviser or planner, usually at a higher hourly rate than the outsourcing provider will charge.
The importance of expertise shouldn't be underestimated either. There are many areas where an adviser or planner might have some knowledge but perhaps not the specialism that's needed.
HR is a good example; writing policies, keeping up to date with changes to legislation, dealing with issues when they arise are all vital tasks, but that doesn't mean you should do them. Better to outsource, get a true expert who will complete the task to a higher standard and free up your time to concentrate on seeing clients and building your business.
There are plenty of other tasks I would consider outsourcing as the owner of an advisory or planning firm. I'd start with investment management.
As I've said before, the days of using a copy of Money Management, a rule and a highlighter pen, to pick funds are thankfully over. It's becoming more accepted that advisers and planners aren't best placed to pick investment solutions for their client. It's not generally their area of expertise, they usually don't have the same resources as third parties and it isn't the part most clients value.
So why do it? Surely it's better to outsource, save time which can be used more productively elsewhere and get experts on the case.
The same applies to compliance. Most financial planning firms aren't large enough to warrant a full-time in-house compliance solution, while a lack of outside scrutiny can lead to 'group think' and introduce unnecessary risk. Again, better to outsource it to bring in valuable expertise and free up time.
I'd then look to outsource other key functions including marketing and finance to specialists. Naturally, the business owners take ultimate responsibility, but they shouldn't be involved in the day to day nitty gritty, which could be done far more effectively by experts.
Avoiding blockages
There's another reason why outsourcing is so valuable; it prevents blockages being created.
We've all seen advisory or planning firms where the owners micro-manage every element. Aside from the frustration this creates in their team it also creates huge blockages and backlogs of work.
Outsourcing can solve this issue.
It means tasks get completed on time and to a higher quality while releasing business owners to concentrate on advising clients and building the practice. In turn, the business will grow more quickly.
As you would expect we practise what we preach.
Our partners can outsource key tasks, including marketing and investment management, giving them time to focus on their clients and developing their business allowing them to truly 'let go and take control'.
The Final Salary red herring
I'm going to return to a favourite topic this month: Final Salary pension transfers.
I've regularly written about my concerns over the past couple of years. However, I'm becoming increasingly convinced that a potentially existential threat is going almost unnoticed.
Best practice might not be enough
Naturally, I welcome the increasingly high standards and best practice I see in this area.
At an individual firm level, that might mean 100% pre-approval of transfer advice (as we exercise at Beaufort Financial), an emphasis on improving knowledge and skills through CPD and formal qualifications, as well as external reviews of both processes and files. Best practice events, allowing advisers and planners to learn from their peers, are hugely valuable too.
However, advisers and planners who implement best practice aren't the ones we need to worry about. Which is why I also welcome the FCA's focus on this area, targeting those firms seemingly intent on making a fast buck before the Final Salary transfer train heads out of town.
Nevertheless, despite the focus on best practice, we face a threat, which despite gaining more publicity in recent months, the effects of which have yet to be fully felt.
The one thing we all need
Ultimately, the ability for advisers and planners to advise on pension transfers rests on one thing: being able to obtain and maintain adequate and commercially viable PI insurance. That's why tales of significant premium increases, limitations on individual claims, excesses being pushed to commercially unviable levels and renewal applications being declined are so worrying. It's clear many PI insurers are concerned about the potential liability they are exposed to, however, some PI insurers, anecdotally at least, seem to be overreacting.
The squeeze on PI terms will no doubt cause some firms to improve processes still further, which must be a good thing; no one should rest on their laurels. However, it may lead others to reflect on the renewal terms offered, the risk they are taking and the commercial viability of pension transfers and conclude that they have no choice but to withdraw from giving this type of advice.
The FCA has reported that £20.8 billion has been transferred out of Defined Benefit schemes in 2017, up from £7.9 billion in 2016. Meanwhile, XPS Pensions Group calculates the average transfer value to be £232,000.
The figures from The Pensions Regulator are different, showing total transfer values in the year to March 2018 reaching £14.3 billion, corresponding to 72,700 transfers.
Either way, that's a lot of people who are required by law to take independent financial advice. If we see a significant number of firms withdrawing from the market, we'll see an increase in the advice gap; which undoubtedly already exists and is one of the reasons those less focused on the best possible client outcomes have been able to flourish.
Meeting demand
My question is simple: if the PI insurance squeeze continues causing advisers and planners to withdraw from this market (either voluntarily or because they can't obtain suitable cover), will there be enough pension transfer specialists willing and able to advise?
There's a very real possibility that consumers will be left in a regulatory purgatory with advisers willing (although not able) to advise, and consumers needing advice, but a very limited supply of firms who can meet their needs.
The solution?
If your PI insurer has taken a unilateral decision to withdraw from providing coverage for pension transfers, there's very little an adviser or planner can do other than look elsewhere.
However, assuming this isn't the case, firms need to do everything possible to ensure renewal terms are commercially viable. That means engaging with your PI insurer, communicating regularly to ensure internal processes are aligned to their requirements (as well as those of the FCA), liaising on problematic cases and potentially reducing the numbers of transfers completed.
There's also the temptation to suggest that advisers and planners avoid advising on high profile schemes. Naturally, British Steel springs to mind and I've heard from more than one firm that they've had the third degree from their PI insurer about their exposure. However, doesn't every member of a Final Salary scheme deserve the best possible advice? Why should those in high profile schemes, such as British Steel, be treated as second-class citizens? A sensible and pragmatic solution in such cases must be found.
What does the future hold?
I really don't know, but I hope common sense prevails.
There are many good advisers and planners working in this area and focusing on achieving the best possible outcomes for their clients. My hope, therefore, is that we see the PI market soften, but I fear we won't, at least in the short term. In which case, advisers and planners need to do all they can to demonstrate how they manage risk and present themselves in the best possible light to their insurer when renewal time comes.
The financial planning profession (and consumers who will need advice in the months and years to come) can only hope it's enough.
MiFID II and GDPR: Did you survive the fallout?
Cast your mind back three months to the 25th May, when GDPR was introduced. Then go back to early January and the implementation of MiFID II.
What thoughts and feelings do these pieces of legislation conjure up for you? Positivity that complying was time well spent to improve your business and the service you offer to clients? A bureaucratic nightmare, which took your focus away from things which matter to clients? Or, perhaps, somewhere in between?
There's no doubt that both represented a significant change to the status quo, with compliance eating up large chunks of time and significant resources. Now things are starting to bed in, I thought we'd revisit both to look at whether they have changed things for the better.
MiFID II
Despite being only eight months in to the new regime, we can already see how it is changing the way we work with clients.
Firstly, there are the financial consequences of the legislation. Compliance will push up costs, which must be borne by the advisory firm, passed on to clients, or a combination of both. I've seen no significant increase yet in the cost of providing ongoing advice, although I have no doubt some firms are considering increasing their charges.
However, in the wider profession I've certainly seen firms amending their service propositions and disengaging 'lower value' clients, for whom the new rules make it impossible to provide an ongoing service to at anything like a reasonable profit margin.
Necessity is the mother of invention and while disengaging previously advised clients will cause a short-term widening of the advice gap, in the longer term it may lead to new business models focused on providing an ongoing advice service at a lower cost. I'm not talking about the current incarnation of 'robo advice' (which in many instances amounts to nothing more than a simplified investment platform) but a more streamlined and cost-effective advice process, aimed at delivering a valuable service, when it's needed, to those lower value clients advisers and planners can no longer service profitably.
Secondly, while welcoming the drive toward transparency, aimed at helping investors understand the fees charged, I must question the implementation. In fact, I'd go further and say that the sheer volume of paperwork a consumer now receives following a simple transaction, such as opening an ISA or topping up a pension, runs contrary to the spirit of the legislation. When will regulators learn that more information doesn't increase transparency if no one reads it?
Finally, there's no doubt that the legislation is confusing for all concerned and riddled with inconsistency. For example, the 10% drop rule applies differently to discretionary and advisory portfolios, and in itself, is a potential force for no good.
Like many, I question the need for the rule in the first place; we all know that it's time in the market which is important, not timing the market. We are yet to see how this will play out, however I'm concerned that when the inevitable market fall happens, at best the new rule will lead to unnecessary and time-consuming conversations with needlessly worried clients. At worst, we'll see knee-jerk emotional reactions, which will run contrary to the fundamental principles of investing.
GDPR
If the slew of emails asking me to reconfirm permissions was anything to go by, most businesses left their GDPR planning to the last minute. While it's emails such as this which seemed to capture most people's attention, I believe there are more significant benefits to GDPR, which we will only see play out in the fullness of time.
We all know there's a need to increase trust in financial services. Equally, we all know that financial scams are rife, many of which are borne out of data breaches.
GDPR gives us an opportunity to tackle both.
Compliance demonstrates to consumers that our profession takes data security seriously. Apologising after a data breach, as so many large organisations have had to do over recent years, is one thing, but surely it's better to avoid that breach in the first place? At an individual client level, a breach could cost the individual victim, and the firm advising them if they are found to be responsible, many thousands of pounds, plus untold damage to their reputation. Only last week an article appeared in the Telegraph telling such a story.
If GDPR is the catalyst for improving data security, and consequently reducing financial scams and increasing trust, that must be welcomed.
Meeting the challenge
Would I have chosen to have either piece of legislation introduced and implemented in the way they were?
No, absolutely not.
I'm also mindful that the job of complying with the legislation isn't over yet. All firms have an ongoing duty to remain compliant and, in many respects, we are in unchartered waters, especially with the 10% rule, which we have not seen play out yet.
Despite both being time-consuming to implement, unnecessarily complex and at times immensely frustrating, I can see the potential benefits in both MiFID II and GDPR, which we need to embrace.
Financial services is the most resilient of all professions. Over the years we have been forced to deal with constant and significant regulatory change; during the past decade we've dealt with RDR, MiFID I & II, and GDPR, not forgetting Auto Enrolment and Pension Freedoms, which have led to a revolution in retirement planning.
Has our profession stepped up to the plate? Damn right we have. And, I have no doubt will continue to do so. In the meantime, we need to focus on what our clients pay us for and value most; helping them overcome their financial problems and challenges, while ensuring they plan for to achieve their future goals and aspirations.
Now, let's get back to the day job!
Beaufort Financial (Nottingham)
Beaufort Financial, the national partnership of independent financial advisers, has opened an office at Stanton on 
the Wolds, Nottinghamshire. It will be headed up by Gurmit Nahal, who has some 15 years' experience in the financial services sector. Gurmit joins from the Nottingham office of accountancy firm Mazars, where she spent three years as a financial planner. There are plans to grow the business to in excess of £100m AUM
Ms Nahal said: "We decided to join the Beaufort Financial because of the flexibility and the support that it offered us to get off the ground. We will make use of all the support services from compliance, marketing and PI as well as the firm's professional connection strategy.
" We believe firmly in value-based financial planning rather than a product orientated service for our high net worth private clients, which dovetails neatly with the Beaufort proposition. A flat fee structure suits our clients. Being independent and whole of market is very important, too."
Beaufort Group's Executive Chairman, Simon Goldthorpe added:
"Opening an office in Nottingham is an important step in our strategy of measured growth. Gurmit comes with a very good reputation in the area and we will provide her with the backing to grow the business, concentrating on high net worth private clients.
"We now have 16 member firms in the partnership and plan to add three or four more by the end of the year."
Why I'm not surprised DFM is becoming more popular
Earlier this year, Andrew Bennett, our Chief Executive Officer, took part in an excellent New Model Adviser roundtable event looking at how advisers and planners can identify the right DFM solution.
I recently reread the coverage of the debate, which you can find by clicking here, as well as fascinating research from Nucleus on the same subject. Both got me thinking about the role DFMs currently play in the advice and planning process.
The case for specialists
As anyone who reads my monthly musings will know, I'm a firm believer in the benefits of employing specialist expertise. If I've got a painful back, I'll visit my GP, but only to access specialist chiropractic support. That in no way denigrates my GP's knowledge or experience; but the complexities of the spine mean I want specialist care.
The same is true when it comes to managing money. I've always believed financial planning and investment management are two different things. Consequently, I believe advisers and planners should spend their time focusing on where they can add the most value, leaving investment management to those for whom it's their sole focus.
Again, I'm not denigrating the work of advisers or planners. Quite the contrary; I believe so strongly in the value of financial advice and planning that it shouldn't be watered down by adding the complexities of investment management.
Those who disagree will probably do so because they believe clients value their investment management skills. In my experience, this couldn't be further from the truth. Sure, clients need their capital invested prudently, with returns in line with their expectations and requirements, but do they care who, or (within reason) how, that is delivered? Probably not. The value to the client is the trust he or she has in the adviser and their recommendations.
So, if outsourcing investment management is the answer, what can we learn from the New Model Adviser round-table and Nucleus's recent research about the role of DFM?
The use of in-house model portfolios is increasing
To be truthful I'm surprised at this.
I've always believed that in-house model portfolios, run on an advisory basis, have significant drawbacks compared to a carefully chosen DFM solution.
Firstly, the model portfolios need to be built, a task which requires specialist expertise and brings us back to the in-house / outsource debate. Secondly, the requirement to obtain client consent for each change creates a significant administrative burden and introduces an additional element of risk. Given that burden when changes need to be made, and the associated cost to the adviser firm, there can be a tendency to leave things as they are. That isn't a good outcome.
Finally, outside of a tax-wrapper the disposal of individual funds creates tax complications.
Obtaining discretionary permissions
The changes introduced following MiFID II, coupled with the administrative burden of running model portfolios on an advisory basis, has previously led to some firms to consider applying for their own discretionary permissions.
However, as the greater regulatory and capital adequacy burden becomes clear, the pace of applications has slowed. Indeed, the Nucleus research shows that the number of firms considering this option has dropped by half over the past two years.
Don't be distracted away from total cost
Periodically pressure is applied to the cost of each element in the value chain (advice, platform and investment). Some believe the cost of investing is too high, others feel that the advice fees should fall. At the same time, the cost of platforms and who should pay for them (the adviser or the client), is hotly debated.
Despite an expectation that greater transparency resulting from MiFID II will force some of the more expensive DFMs to cut charges, the presumption of many advisers and planners is that they are too costly. It's a view I have some sympathy with.
In many respects though it's a red herring. Each element of the value chain needs to be competitive, but it's the total cost which is most important. The danger is that we focus on one element, forgetting to look at the whole picture. Or worse, dismiss DFM as a potential solution based on an outdated misconception that it's always too expensive.
So, is the answer DFM?
From fixed fees to non-contingent charging, active to passive, our profession is plagued by people telling anyone who will listen there's only one answer, theirs.
While I'm happy (from time to time) to climb on my soapbox, I'm less comfortable in a pulpit, so I'll spare you the sermon. However, I firmly believe in two things:
- Outsourcing investment management reduces risk, creates more scalable businesses and produces better client outcomes
- Using a panel of DFMs, following a wider process of due diligence, should form part of that solution
Only you will know what's right for each segment of your client base. However, I can certainly see why DFM is becoming a more popular option for those advisers and planners who want to let go and take control.
Beaufort Financial (St. Asaph and Chester)
Beaufort Financial, the national partnership of independent financial advisers, has established a presence in North Wales and Cheshire, Gaynor and Stephen Lyth, who established the Chartered Financial Planning Practice Alchemy Advisory Services in 2004, have now joined the Beaufort Group. With offices in both locations, they will re-brand the business Beaufort Financial (St Asaph & Chester).
As part of the deal, some 500 private and corporate clients will transfer to the new firm, which has around £65 million of assets under management.
The firm includes a third adviser, Geoff Goodwin who joined in 2017 from HSBC, for whom he worked in North Wales for over 16 years.
Commenting on the news, Stephen said:
Our team has over 80 years' experience in the advisory sector and offers a comprehensive range of financial planning services. We feel now is the time to partner with a group that has a similar mindset to our own, we spoke to a number of consolidators, but did not believe that joining any of them would be in the best interests of our clients.
We were lucky to find the Beaufort Group, massively impressed by the quality of the senior management structure and the award-winning performance of its DFM, Beaufort Investment. This combination offers our clients the very best service, with keenly priced platform fees, attributes fundamental to a firm of our size. Beaufort's rising financial brand was also a significant factor in us reaching a decision, this is a financial planning group going in the right direction.
Cash flow modelling, robust compliance and skilled paraplanning will now be looked after centrally, leaving us to concentrate on what we do best; delivering a high standard of personal service to our clients.
Beaufort Group's Executive Chairman, Simon Goldthorpe added:
"We are delighted that Gaynor, Stephen and Geoff have joined us, we look forward to helping them further develop their business over the coming years. Quality advice should not be hampered by ever increasing regulation and legislation, joining Beaufort will enable them to grow their assets under management and the number of clients they deal with. Their firm is an ideal match for us and will fit perfectly into our Partnership.
We are half-way to establishing 25 centres of excellence throughout the country and have plans to welcome another four or five firms to the Group this year.
Beaufort Group heroes complete the National Three Peaks Challenge
Over the hottest weekend of the year, when the BBC reported Scotland breaks temperature record a team of ten people from the Beaufort Group of Companies, and four friends and family members attempted to complete the National Three Peaks Challenge in 24 hours, all in aid of the charity Dreams Come True. The challenge involves climbing the highest peaks in Britain - Ben Nevis in Scotland at (1345 metres above sea level), Scafell Pike in England (978m) and Snowdon in Wales (1085m).
The team, led by Beaufort Investment's Head of Research and Portfolio Construction, Shane Balkham, travelled to the foot of Ben Nevis Scotland and began the ascent at 11.40 on the morning of Saturday 30th June. All but one of the party made it to the top of Ben Nevis in four hours. The party then travelled to Scafell Pike, arriving at 1.30am and leaving at 7am, arriving at the foot of Snowdon at 11.30am. The team reached the summit of Snowdon at 2.30pm on the afternoon of Sunday 1st July.
Five of the team managed to climb all three peaks: Shane Balkham, Jon Creasey, MD of Beaufort Financial (Fareham) and Chris Masters, MD of Talking Finances and guests, Simon Rogers and Waren Plummer.
Eight of the team climbed Ben Nevis and Scafell Pike; those listed above, along with Celeste Ainge, Head of Marketing, Beaufort Group and guests Kate Bennett and Jonathan Crayston.
The rest of the team was:
- Andrew Bennett, CEO, Beaufort Group
- Tony Hicks, Head of Sales, Beaufort Group
- Emma Clarke, Senior Fund Analyst, Beaufort Investment
- Rachel Bennett, Project Manager, Beaufort Group
- Graeme Bone, Director, Beaufort Financial (Reading)
- Anton Boshoff, Quality Assurance Specialist, Beaufort Group
Andrew Bennett, CEO, Beaufort Group said:
The heat was unprecedented; the temperature at the start of the challenge was 33 degrees. Not everyone in the team made it to the top of all three peaks, but we all stretched ourselves to the limit and despite the blood, blisters, aches, pains, sweat and tears, there was plenty of laughter too.
I'm really looking forward to sharing details of the children who will have a dream come true thanks to our efforts; I hope others will enjoy them and consider getting involved in other fundraising events organised by the charity: https://www.dreamscometrue.uk.com/47/fundraising
Martyn Paul, MD of Advocate Events who organised the entire trip commented:
I thoroughly agree with our mountain leader, Darren Hunt who said that the team spirit was awesome, and the fact that the CEO joined in the fun is testament to quality leadership. These kinds of experiences bring the best and sometimes worst out of us, but they are a true test of our character. As a group, new relationships are formed and old ones reaffirmed. Above all, their common goal was to raise £1,000's for Dreams Come True and I'm honoured to say many children's lives will be touched by the generosity of this band of brothers and sisters. It's been a privilege.
Celeste Ainge, Head of Marketing, Beaufort Group, added:
As ever, these things don't happen without a lot of planning and support. So, huge thanks go to Martyn and Joanna Paul from Advocate Events; to Martin Neal from Dreams Come True who kept us motivated with inspiring stories about the children the charity has helped; to Andrew Bennett, our Group CEO who enabled us to run the Surrey Peaks training walk; and to Shane Balkham and Rachel Bennett at Beaufort Group who have done a huge amount to raise money with an online auction and bar quiz.
So far, we've raised over £10,000, (not including Gift Aid) but we want to double that by the end of the July. Donations are being accepted until the end of July at: https://virginmoneygiving.com/fund/beaufortgroup
Is cashflow modelling the key to turning us into financial planners?
In last month's blog I considered whether we are an industry or a profession.
I argued that for many the journey from adviser to planner is already well underway, while an increasing number have already arrived at their destination. That shift from advising on products, tax and investments to a more strategic approach, based on sound financial planning principles, has occurred partly due to the wider adoption of cashflow modelling tools.
Before I continue, let me make it clear that I'm aware of the sensitivities around the term: cashflow modelling. I know many planners prefer alternatives. However, for clarity I am of course referring to software such as Truth, Voyant and CashCalc, and for the sake of brevity, I'll continue to use cashflow modelling for the remainder of this article.
Wide use
In many ways, the introduction of RDR followed a few years later by Pension Freedoms made the wider adoption of cashflow modelling, and the move toward financial planning, inevitable. They are of course the two pillars which hold up your client's financial future; both are equally important and without them, your client's future will be less assured.
Naturally, there are opposing views (when was it ever any different in our profession?) and there are those who dismiss the need for cashflow modelling. Many cite the fact client circumstances constantly change and financial plans consequently become quickly outdated. Others believe their clients are too wealthy, or too poor, and don't need cashflow modelling. These are all valid points of view, which I respect, but nevertheless disagree with.
Let's take a slightly different perspective:
As Executive Chairman it's vital that I understand the future direction of our business:
- Are we on-track to achieve our targets?
- How would potential threats affect our plans?
- Which areas of our business are performing well, and where could improvements be made?
To answer those questions, I have a wealth of information at my disposal, including strategies, plans and financial forecasts. Why should it be any different for my personal finances? It isn't, and nor should it be for most consumers.
A win-win
Cashflow modelling doesn't have to be complex. In many respects the simpler the plan, the easier it is for clients to understand and stick to. However, it's a vital component of true and effective goals- based financial planning.
The adoption of cashflow modelling, in the context of financial planning, has many advantages for clients:
- It provides clarity on the progress they are making towards their goals. When they initially meet you, most clients will be in the dark about whether their current arrangements will meet their financial objectives. Cashflow modelling will answer that question.
- It allows for additional possibilities and scenarios, both positive and negative, to be tested and understood.
- It provides confidence and reassurance that their financial future is in safe hands.
- It allows them to visualise their financial future in the form of images and graphics, which are so important to those people who find interpreting sets of numbers and tables difficult.
There are also many benefits for your business. Adopting cashflow modelling will:
- Help facilitate more meaningful, goals-based, conversations.
- Change the focus of review meetings from investment performance toward goals-based financial planning (as regular readers will know, we firmly believe that those advisers and planners who let go of their investment management, will take control of their business).
- Help you grow your business through increased referrals and recommendations as those clients who you help achieve their goals see the benefits of financial planning.
Adopting the new model
Of course, the transition to becoming a true financial planner is about much more than simply adopting cashflow modelling software.
It starts with a change of mindset (or at least a continuing evolution) from that of an adviser to a planner. Developing the necessary financial planning skills takes years. In fact, we should never stop learning and I'm not sure it can ever be perfected.
Then there's the practical stuff; changing advice and service propositions, migrating old clients, training staff, updating your marketing strategy and proposition…all these things take time and effort.
The pay off though is massive; more clients will achieve their ambitions, your business will be stronger and your own job satisfaction may well improve too.
So, back to the original question; is cashflow modelling the key to turning us into financial planners?
No. But it's certainly part of the answer.
The movement from financial advice to financial planning, and consequently from an industry to a profession, takes much more than the adoption of software. It's a complete change of mindset (for you and your clients), processes and proposition. However, used correctly cashflow modelling software certainly has a vital part to play.
I've seen the reaction of those clients who have had the veil of mystery over their financial future lifted. It has got to be one of the most rewarding aspects of what we do.
Beaufort App relaunch
Beaufort Financial has relaunched its app on the 'MyIFA' platform. Download on your Apple or Android device to stay up to date and access handy tools to take control of your finances using the password 'beaufort'.
Tools include a range of calculators such as income and inheritance tax, mileage trackers and receipt managers as well as many more. Learn more about Beaufort Group's business, news and services and keep up to date by enabling helpful notifications.
The app is the best way to find solutions to everyday financial matters whilst keeping engaged with Beaufort - download it today!
Please note, our previous app will soon no longer be supported - to ensure you don't miss out you must download the new app - simply search for 'MyIFA' in your app store and enterBEAUFORTwhen prompted.
Beaufort Financial work with Walsall College photography students
Beaufort Financial Birmingham have worked with local photography students at Walsall college to bring a local feel to their brand
The work was part of a competition lead by Co-Founder and Chartered Financial Planner Paul Gorman. The students were given a brief which explained Beaufort's brand concept - art and science. With firms nationwide, the brief also encouraged a local element to photographs submitted.
Once submitted, the entries were judged against the brief by a panel at Beaufort and the winners were chosen. Monetary prizes were offered for first, second and third place as well as the fantastic opportunity to work with a professional service and have images published for commercial use. All winning work will be used in future digital and offline marketing, branding and communications from the Birmingham firm as well as being displayed in the local offices.
The winners were revealed on 18th May at a presentation at Walsall college and prizes were awarded in the following order:
First place - Guyvor Weals - Tails
The idea for the image originated from the smoke effect seen when acrylic paint enters water. I felt this would relate to Beaufort's theme of art and science. I created some acrylic paint mixtures of blue and yellow colours; and poured them into a fish tank full of water. I used Photoshop to dictate the colour of areas of the image, helping to create colours to match Beaufort's brand.
Second place - Debi Heath - Birmingham Library
Linking to the local area I decided to focus on Birmingham Library because of the links to science and art through books and the design of modern architecture. From an abstract point of view, I focused on only part of the building, taking into consideration the shapes and patterns formed by the structure.
Joint third place - Gemma Palmer - Waves and Alexandra Mole - Selfridges
The idea to create the image that I entered came from a few different elements from the brief. First of all I wanted to ensure I had the colour scheme in mind and also I wanted to include feel ofBirmingham and the Midlands. I then came up with the idea of capturing iconic landmarks which resulted in me capturing the photographs of the Selfridges building.
Offering some more detail on the concept, Beaufort's website states that the firm's financial advice to consumers combines the 'art' of knowing and understanding life goals, with the 'science' of identifying the best financial solutions to achieve them.
Reflecting on the competition, Paul Gorman said This has been a great opportunity to work with local students and give them the opportunity to work with us. The results have provided us with high quality stimulating imagery that will help to establish our local brand. I look forward to working with Walsall college again in the future..
If you would like to keep a look out for upcoming use of imagery you can visit beaufortfinancial.co.uk/birmingham
Are we an industry or a profession?
Industry and profession; two small words, often used lazily and interchangeably.
Indeed, if I looked back over these blogs I'm sure I've been guilty of doing the same.
The words we use matter though; they reflect how we perceive ourselves and more importantly, how consumers see us, the services we provide and the value we offer.
In many ways it all comes down to one word: trust.
Our recent YouGov survey (you can read about it by clicking here) clearly showed that a lack of trust was one of the key reasons people over the age of 55 don't take financial advice. When we see daily the benefit clients get from working with us and we know 90% of consumers (Source: Royal London) are satisfied with the advice they receive, that's hugely frustrating.
Making the change
If we don't perceive ourselves as a profession, what chance do we have in convincing others? I believe the first step therefore is simple, yet crucial: stop using the word 'industry' and substitute it for 'profession'.
It's a small change, and one which some will rightly criticise as window-dressing if it isn't backed up by action. As Gandhi said: You must be the change you want to see in the world. However, I'd argue that the journey from industry to profession has already started. RDR certainly helped and for many was the kick-start they needed, but for fundamental change to really take hold it can't be driven by regulators; individual advisers and planners need to be the catalyst, lifting their own standards and those of people around them.
So, how can we build on the good work that's already been done and speed up the pace of change?
1. Root out poor practice
The only thing necessary for the triumph of evil is for good men to do nothing.
Where we find miss-selling, poor practice and bad advice it must be reported appropriately. We can't turn a blind eye. The regulator then needs to thoroughly investigate the allegations and when appropriate impose sanctions.
The case of British Steel was a great example of this model in action; financial advisers and planners uncovered poor practice, alerted the FCA, who acted quickly and decisively. Hopefully, others who might be tempted to take advantage of consumers in the future will been deterred by what they've witnessed in South Wales and elsewhere.
2. Demonstrate the value of advice
Nothing damages the reputation of our profession more than miss-selling, poor practice and bad advice. The personal finance press is quick to cover such stories, and are right to do so, but it does anger me that the coverage isn't more balanced.
To change that and improve the balance, we must get better at understanding, and then communicating, the value of advice and the positive impact we have on our clients' lives.
While this impact can be demonstrated in financial terms through the mounting evidence that taking financial advice makes people better off, it isn't all about the money. We know our work has a human benefit too, perhaps helping a client retire early, giving people the confidence to make a fundamental change to their life, or providing reassurance after the death of a spouse. We know there are huge intangible benefits to financial advice and planning, we just need to talk about them more. Our role as educators is often missed and undervalued. We all know the difference it makes to a client when they 'get it' and then start to feel comfortable about their future - how can you put a price on that?
3. Improve standards
The drive to raise standards isn't exclusively about improving our technical knowledge and qualifications, but it certainly has a key part to play.
RDR meant that many advisers and planners needed to become more qualified. That regulatory nudge (for some it might have felt more like a shove!) has been embraced by many advisers and planners, with ever greater numbers going on to achieve higher levels of qualifications and accreditations.
I believe that applied correctly this increased knowledge will benefit consumers, but do they feel the same? Do consumers know how to select a financial professional? Do they understand the difference between an adviser who has the minimum level of qualifications required and a Chartered Financial Planner?
I'd suggest they don't.
We need to get better at explaining our qualifications, the effort which goes in to achieving these higher standards and, crucially, how they benefit our clients.
Some will scoff, pointing out that most accountants and solicitors wouldn't dream of explaining their qualifications to a prospective client. That might be so, but it doesn't mean we shouldn't. After all, we are starting at a much lower base, continually blighted by stories of miss-selling and poor advice, if we don't fight back and demonstrate our professionalism, who else will do it for us?
The trust dividend
The benefits of moving successfully from an industry to a profession are huge. Our individual businesses will flourish, so will the wider profession and we'll finally be perceived on a par with other professionals. Equally importantly though, it will improve trust and confidence in our profession, leading to more people taking financial advice, helping them to lead better and more fulfilling lives.
Now, who's with me?