Look, over there – I see an IFA wrestling with a genie

I’ve just been reading a rather extraordinary trade press article by the well-known and extremely reputable (for a Glaswegian) IFA Robert Reid.

In it, he says lots of things that I completely agree with, such as “We need to heed the perspective of the consumer” and “There is only one boss – the customer.” And “when it comes to defending charges, we need a better reason than that ‘we have always charged 3 per cent plus 0.5 per cent'”.

But – forgive the long quote – he also says:

“I am sure we have clients who look at our charges and wonder what we did for them this year. However, simply to link activity with value for money is to ignore the fact that the fee enables access to professional advice from someone already well-versed in your financial situation and goals….An IFA’s costs are about more than time on the clock. Some people will try to barter, but that is best dealt with by asking them if they would barter with their own services…

(In) a conversation I am due to have, a client will take this no-use, no-pay view, but given that we wrote off excess time when we took the client on, I will not be for moving my charging structure as pacification. We may drop the client onto a lower level, with no proactivity, but that will still involve ongoing cost as we do not offer the pay-and-play model.”

You can’t help thinking there’s a bit of a disconnect between those worthy comments about customer focus and customer centricity on the one hand, and then that blunt Glasgow-accented “we do not offer the pay-and-play model” on the other. You can almost hear that unspoken “Jimmy” at the end.

And I’m afraid that when push comes to shove (which it will eventually, if not for some while yet) it’ll be the customer centricity that will win out over the “we do not offer.”

In my own industry, marketing consultancy, and some close relatives like PR and design, in principle we love the idea of long-term retainers in which clients, sometimes for years on end, pay us money for doing no work.

In practice, though, these days very few clients – if any – are willing to enter into such relationships. And if any do enter into any kind of retainer-based relationship, even a short-term one, and there is then any sense that from one month to the next they’re getting either more, or less, service than they’re paying for, then either they or the supplier will immediately blow the whistle and demand some sort of recompense.

As a result, the huge majority of clients and consultants have long ago come to the conclusion that pay-to-play is really the only basis that works for a fee-based relationship. Certainly speaking for myself I wouldn’t dream of proposing anything else (or to put it another way, in Mr Reid’s language, I will invariably “barter” my own services): and, unsurprisingly, as a result, in the long run I wouldn’t dream of working on a blank-cheque basis with anyone offering advice or consultancy to me.

Clearly this blog connects with what I wrote a month ago, on June 16th, when I said that actually, in my view, the average IFA client doesn’t actually need much ongoing service or advice most of the time, and if advisers try to carry on charging thousands of pounds a year for doing very little except providing an annual statement and being available, they’ll soon run into trouble.

I’m afraid that in his slightly schizophrenic article, Mr Reid is trying to push the pay-to-play genie back into the bottle. But the genie is well over half-way out, and it’s protesting loudly at what Mr Reid’s attempting: I have a nasty feeling that by drawing attention to it, he’s only making the situation worse.

1 thought on “Look, over there – I see an IFA wrestling with a genie

  1. Given how few HNWs exist in reality to form the client base for all those IFAs out there, they will have to take on more & more Mass Affluent – P.L.U maybe. Will we all thus be on a ‘no proactivity’ model? Why would we have an IFA at all on that basis? What on earth will the IFAs do with all their time, as a lot of it will be free under that model?

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