Client Reviews

This week, we've been focusing again on what it is that we're seeking to deliver to our clients - which makes a real, substantive difference to them where it matters.  It has long been our contention that a very great deal of (historic) IFA activity is in fact self-serving, and is there to preserve a number of fictions about our value, with a discernible uplift to our fees.

There have been a couple of reasons for this focus.  Firstly, we've been in the process of sending out clients' annual review reminders, especially in connection with Pension Drawdown arrangements.  It has seemed to us that these moments of contact are of strategic importance, both positively and negatively:
  • Positively - an opportunity to deliver discernible value, in terms of controlling risk, IHT planning, preserving (or spending) capital, improving terms etc, and
  • Negatively - providing a framework for absolutely minimising the likelihood or basis for future complaints.
If these things are true, then how we manage our client reviews, what we choose to include within them, and our communications to our clients all matter very much indeed.  It seems to us that if intermediary firms are receiving recurring revenues in relation to their clients' investment products and they do not in their Terms of Business specifically exclude the provision of an annual review, then they are very likely storing up trouble for themselves.

The second reason for this focus, arose in relation to an enquiry regarding non-advised sales, where, for low value peripheral business, a modest initial fee might be earned in relation to a referral, but nothing further.  The key benefit here would be to minimise adviser involvement, and allow the client to access online solutions cost-effectively.  Clearly, for hard-pressed IFA firms, there is some attraction with a 'Just click here' solution which may be deployed whenever the client wants something that isn't regarded as 'core' to the firm's main proposition - but it seems to me that there are a few problems with this:
  • Clients still want advice - we may provide all sorts of clever, whizzy online solutions which people can access on their own, but experience indicates that most people still favour the one thing which this technology cannot deliver - real advice;
  • The core to your successful business is you - not the products, not the technology.  It's the value you add as an engaged, caring financial-planner which will keep bringing people back for repeat business;
  • It seems to us that, the more remote your proposition is, the less closely you tie your clients to you, and the higher the probability of unsatisfactory outcomes later on;
  • These kinds of non-advised propositions might cut out the 'additional cost' of the annual adviser charge, but how much less does the customer actually end up paying?  We ran our own comparisons, using the ValidPath Investment Proposition as a benchmark, and decided that the client could well end up paying more for their non-advised service, than they might for the advised version.  Now that doesn't seem to be progress;
  • I leave this point last, because it ought to be the final consideration, but there is the issue of recurring revenues, and building the value of your business with at least half an eye open to the future sale.  The value of IFA firms, on the open market, is still expressed (generally) as a multiple of recurring revenues.  Assets sitting somewhere where they make no contribution to your cashflow also don't assist your exit strategy.
What are you doing about client reviews?  Indeed, is it time to review what you are doing here?
This week's emphasis
In ValidPath's Business Development area, there's a whole library of guidance, training, checklists and template letters that you can use to plan, develop and equip a really effective annual review service.  This particular library is only available to our ValidPartner Members.
Kevin Moss, 09/05/2013