Time to de-Risk your business?

diceWhen it comes to risk, there are factors that we can control, and those that we can't. So many lie outside of our reasonable sphere of influence that all we can do is acknowledge that they are there, and keep our eyes peeled. Few normal mortals can expect to have any real impact on the economy, or world stockmarkets, or government policy, or regulation.

Over the years that ValidPath has been engaged in supporting IFA firms, we have, however, identified a range of practices which actually increase business risk - and the surprising thing is that they are quite widespread. Here are a few examples:
  • an over-dependence on indemnified commissions, accompanied by an indifference to the practice of maintaining clawback reserves - thus the inevitable happens when the economy hits the buffers;
  • a disregard for the practice of regular, routine client contact - which means that, when adverse investment conditions give rise to client dissatisfaction, there is little 'relationship' in place which might mitigate the risk of a complaint. In our experience, around 80% of all complaints would simply not happen if IFAs kept in contact with their clients;
  • the acceptance of any business on almost any terms, rather than the cultivation of referrals from your best clients, in order to introduce some quality control;
  • a disdain for 'templated solutions' in favour for bespoke arrangements, every one unique to the client in question which can tend to spawn a multiplicity of investment solutions which are (a) immensely time-consuming to create, and (b) impossible to monitor and manage over time. And, of course, the likelihood of a recommendation blowing up in one's face is significantly raised;
  • placing little emphasis on the 'annual review' element of our service.  Quite apart from the risks that this might present to existing revenue streams in an RDR world, there is the obvious likelihood that opportunities are missed due to the absence of planned activity;
  • a focus on getting business written and paid, leaving the less enjoyable compliance elements to later on. Files constructed this way are rarely persuasive when it comes to building a defence in the face of a client complaint. Nothing beats doing the job correctly, at the time it needs to be done - and it almost beggars belief that this kind of thing still goes on. But it does.
At ValidPath, we've felt for years that there is a better way. It's a way that not only minimises the risks that our clients need to take in order to achieve their goals, but it's also a way that extracts these kinds of systemic risk from our business model. It is, when you analyse it, far from rocket-science, which begs the question: why are so few other intermediaries tackling the issue?

You'll find certain aspects of our approach summarised on this website, here and here.  Suffice it to say that ValidPath is your best route to a thriving practice.

You can also download our latest leaflet 'A decent proposition?' by clicking here.