Despite the current ‘doom and gloom’ being put around by some, it has been fascinating and refreshing to have had conversations with a couple of IFA businesses that have recently moved to 100% fee based models – both conversations were quite inspiring.
The two stories were remarkably similar and neither moved to fees to pre-empt RDR, in fact RDR was almost irrelevant to their decision. Both believed passionately that fee based services were the way forward for the benefit of their customers and their own businesses. They had taken a little time to establish exactly how to achieve this, but once they had invested time to indentify and clearly articulate their business proposition, they hit the streets with their new models and haven’t looked backwards since.
That makes the transition sound easier than it undoubtedly was. For one of the IFA firms, they started with a client bank of 4,500 and found only 10 of those would transition to a fee based model. How scary is that? The client bank that they had grown and nurtured for 10 years was effectively going to have to be rebuilt – virtually from scratch! However, they did it and at the end of year one of operating their new model they had grown revenue by 85%!
With RDR coming around, you may think these companies are sitting there looking pretty smug – ready for the changes. However, regulatory change was never the key driver in the first place – good customer service and keeping ahead of the game was the motivation and these firms are now looking at what to do next to stay at the forefront of the market with a service based value proposition.
Neither of these firms is large, they are not owned by large product providers, or heavily capitalised. However, as with many IFAs, these companies are resilient, resourceful, focused and driven. As a result, they will undoubtedly survive the difficult conditions the financial services market is currently facing. A fear of failure is causing some to bury their head in the sand and hope these issues will go away. Those facing a similar dilemma should not be afraid to ask for help and as these companies have shown, it is not only possible, it has proven to be more beneficial than trying to maintain the status quo.
