What we believe matters

It came home forcibly to me earlier this week, in a discussion with the business-manager of a regional firm of Chartered Accountants.

The CA practice had put themselves through the ordeal of interviewing local firms of IFAs, with the intention of identifying one which would fit their holistic business model, for referral purposes. The number of firms interviewed went into double-figures, but what was interesting was the way in which they fell into two contrasting extremes:

Approximately 50% of the firms being interviewed had either convinced themselved that "the RDR is not going to happen", or alternatively were intent on changing their business model in order to avoid the implications of adviser charging. As far as we could see, this would involve a narrow focus on non-investment protection business with its continuing eligibility for indemnified commissions. Needless to say, this state of affairs was not particularly attractive to a CA firm interested in developing a decent wealth-management solution for their clients;
The other half of the firms had clearly taken stock of the situation, and were heading in precisely the reverse direction - which involved Chartered Status, fee-based clients, and an unswerving focus on HNW clients only. The majority of such firms were simply not interested in clients with less than £250k AUM, and indeed generally considered them to be somewhat beneath them.

Let us, for a moment, dispense with the obvious truism that it would be nice to only deal with clients who had more than a quarter of a million to invest. Such a qualification, in many parts of the UK, would almost immediately eliminate 99% of the population as potential clients! More to the point, a regional accountancy practice would want its clients looked after, rather than some mythical breed which might exist in small numbers in remote localities.

But, for me, there was another, rather more fundamental issue underpinning this kind of outlook which I would suggest raises a few issues for consideration. Presumably, most customers who fit the AUM criteria of such wealth-managers, have managed to accumulate this critical monetary mass without the help and expertise of the IFA firm in question. It seems to me to be highly unlikely that such individuals would feel a pressing need to hand over their hard-earned assets to someone new, given that hitherto they have (apparently) managed perfectly well without their services. Indeed, if I were being relentlessly cynical, I would (if I were the client) view the wealth-manager's proposition as being somewhat parasitic in nature.

The alternative seems much more preferable - that the IFA, or financial-planner sees their role as building the client's wealth, rather than simply capturing it once someone else has done the donkey-work. Until such a day that technology develops to the point where new clients may be hatched straight from the womb with the required minimum of assets to invest, it seems to me that IFAs or financial-planners had better work a darn sight harder at developing services and disciplines which actually build people's wealth.

To that end, and as a brief reminder to ValidPath Members, we have our 'Money & Ethics' workshop in London on the 6th December. There's a short signup form there for Members who wish to attend.

Kevin Moss, 17/11/2011