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Start Your Own IFA Practice - Page 1

There is a better way

How to start a profitable IFA Practice

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Contents
Foreword Introduction Recognised Qualifications Regulatory Approval An Appropriate Business Entity Additional Authorisations A Robust Compliance Framework Professional Indemnity Insurance Tools For The Job Real-World Marketing Joined-Up Services Essential Literature A Workable Strategy Move Beyond The Transaction Highlighting ValidPath Resources Where to Go For More Information Links to Key ValidPath Resources Faxback Feedback Page 4 Page 5 Page 7 Page 9 Page 11 Page 13 Page 15 Page 17 Page 19 Page 21 Page 23 Page 25 Page 27 Page 29 Page 30 Page 31 Page 32 Page 34

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Foreword

F

inancial services work is one of the areas about which the accountancy profession has a tendency to blow hot and cold. In part, this is due to changing perceptions of the regulatory environment, so perhaps we should not be surprised by varying opinions.

My own experience of financial services work within the accountancy profession dates back to the mid 1980’s. With the advent of self-regulation and FIMBRA, a majority of professional firms elected to withdraw from the financial services market, and this trend persisted through to the arrival of full-blown regulation under the PIA and latterly with the FSA. The last 20 years within the financial-planning profession have been characterised by huge upheaval (some of it was needed!), colossal expense and burgeoning bureaucracy. Alongside these influences, we have see a very welcome improvement in professional standards, as exemplified by the new minimum qualifications (see page 7). So, we’ve had three distinct regulatory frameworks, the Pensions Review, the Endowment Review, Split-Cap and Precipice Bond compensation, a contracting PII market, and a mass-exodus of small IFA firms. Why should accountants be looking at this sector? I provide the following reasons as food for thought: (1) The contraction in the traditional IFA market has left plenty of room for accountancy professionals to operate competitively. That space is about to be enlarged significantly as the FSA implements its ‘Retail Distribution Review’ (RDR) at the tail end of 2012, triggering a massexodus of traditional IFAs; If there is a ‘risk’ attached to financial services work it arises from a sales culture rather than one steeped in client service, and with a healthy respect for compliance. Accountancy professionals handle financial services work in a careful, and generally low-risk way; New technology allows advisers to focus on the service they provide rather than on the bureaucracy and administration, and at ValidPath we’ve pioneered one of the lowest-cost, effective solutions available in the UK; The politically-correct view that if you only give customers enough information, they will make wise financial decisions simply does not work. We all know that clients don’t read or understand what they are given, but more importantly they want someone else to do the hard work for them. That gives you a huge potential market; The old ‘referral model’ for clients who need financial advice simply doesn’t work for accountants. It results in equity walking out of your front door, lack of control and (generally) a poor service to clients; The ‘Interweb World’ gives clients a bewildering array of choices, most of which will go straight over their heads. What they really need is someone who will help them plan methodically, who has all the facts at their fingertips. And that someone is you.

(2)

(3)

(4)

(5)

(6)

Kevin Moss May 2011
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Introduction

P
q q q q q q q q

lease don't even consider setting up your own Financial Planning practice if any of the following apply: you're already too busy; you consider financial services work to be a potentially useful 'add-on' which you may develop, time permitting; you do not want to study for the required professional qualifications or you are unlikely to be in a position to 'bring in' your own IFA from outside; you are part of a conservative, multi-partner practice, with some of the more influential partners nearer to retirement than you are; you are in partnership with colleagues who would prefer to refer their own clients externally, as it more rapidly generates an initial return; you are not prepared to market the service in a sustained and consistent manner; there is any suggestion that you, or your partners, see financial-planning as ‘something else’ that may be offered to the client, after the real work is done; you have a sense that ‘financial services’ is somehow sleasy or faintly unethical.

In our experience, although financial services is in many ways the perfect value-added service for accountancy professionals to offer to their clients, there are far too many instances where it simply doesn't work, and usually for the above kinds of reasons. So, if any of the above apply – don't do it! On the other hand... Good-quality financial-planning is an almost perfect fit if you work in a proactive way with your clients, and are already moving your Practice's service format towards the value-added end of the spectrum. Whilst there are plenty of financial 'product-sellers' out there, there is a dearth of financial-planners who will work alongside the client to help optimise his/her personal financial security at every stage of life. If you are interested in that kind of ongoing, two-way financial relationship, then financial-planning may well be the right service to develop into. Effective financial-planners command high hourly rates, or may charge significant fixed fees for their work, so this can be a lucrative business if you approach it correctly, and if you have a thoughtfully designed business proposition that suits your clients’ actual needs. This booklet is not a long publication, but it is a distillation of our own observations, based upon many years of practical experience in the field. These notes are intended to provide you with an introductory overview of what would be entailed in setting up your own financial planning business. They are not intended to replace the very comprehensive resources that we supply as part of our support package for firms that choose to become Members of ValidPath Ltd.

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Your Notes

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REQUIREMENT #1 – RECOGNISED QUALIFICATIONS

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here are minimum standards that the regulator (the FSA) requires to be in place before anyone is able to provide financial advice. The main primary groups of qualifications are administered by the Chartered Insurance Institute (CII) and the Institute of Financial Services (IFS).

For the purpose of simplification, we will in this booklet merely consider the first of the two options, which is the Certificate of Financial Planning offered by the CII. At the time of writing, this is still the deminimus level for qualifications. The CFP comprises five basic papers, as follows: (CF1) UK financial services, regulation and ethics (CF2) Investment and risk (CF3) Financial protection (CF4) Retirement planning (CF5) Integrated financial planning In addition, those individuals wishing to provide mortgage advice, should also study for the following: (CF6) Mortgage advice There are plenty of additional modules which can be followed, depending upon an individual financialplanner's preferred areas of expertise and interest. For instance, CF7 will qualify you to advise on Lifetime Mortgages, CF8 on Long Term Care Insurance, and ER1 on Equity Release plans. You may logon to the CII's website (www.cii.co.uk) for more detail such as (i) costs of coursebooks, (ii) outline of syllabuses, (iii) dates and costs of exams. Full syllabuses are available for download in PDF format. The CII offers varying levels of supervision/tuition, depending upon your requirements. From the beginning of 2007, papers CF1 to CF4 may be taken online (they are primarily multiple choice format), whereas CF5 may be taken in regional centres on a quarterly basis. This fifth paper is more demanding, involving written case-studies. It is our opinion that a majority of accountancy professionals would have little trouble in studying for, and taking, all five papers within a 9-12 month period, assuming a reasonable degree of application. However, in our opinion, the old CFP is no longer of sufficient depth and quality for accountancy-linked advisers who may be wishing to offer financial-planning or wealth-management services. This is partly because the market has developed rapidly, and partly because of the new standards which are being ushered in by the FSA’s ‘Retail Distribution Review’. It should be stressed that whilst CF1-CF5 is what is needed to get you through the door, the bar is being raised substantially in readiness for RDR implementation in 2012. Our recommendation is that all new candidates should register to study for the new ‘R’ series papers which deliver a Diploma level qualification. Whilst you can still pursue the old ‘CF’ route, you’ll have to add so much gap-filling study, that in the end it will be simpler and safer to pursue the new qualification. For accountancy personnel seeking to enter this market, our advice would be to go for the new standard qualifications from outset - or recruit to your firm an IFA who has already got them. So that gets you qualified. What next?

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Your Notes

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REQUIREMENT #2 – REGULATORY APPROVAL

B

efore you can set out your stall, purporting to offer financial advice (other than in the most basic, generic sense), you need to be authorised.

The regulator (the FSA) stipulates that all individuals exercising some kind of financial adviser (relating to investment and protection products) role, should be allocated a 'Controlled Function', which means them applying to become an Approved Person. There are essentially two ways you can do this: 1. Opt for Direct Authorisation with the FSA – which will attract a one-off Authorisation fee of £1,500 (straightforward cases), £5,000 (moderately complex cases) or £25,000 (complex cases). It should be made clear that the lower initial cost would be most likely for small firms joining. In addition to this, you would be liable for the normal annual costs of the FSA Periodic Fee, FSCS Levy and FOS Levy. At the time of writing, the total annual cost for a new applicant is estimated to be around £1,723.75. As a directly-authorised firm, you will be fully responsible for your own compliance with the regulations, and arranging your own compliant Professional Indemnity Insurance (PII). 2. Opt for indirect authorisation, as an Appointed Representative (AR) of an already regulated firm. This route will usually save you the initial fee to the FSA, will provide you with a ready-to-run compliance and business framework, and the benefits of a significantly cheaper group PII policy. This is the sector that Networks such as ValidPath cater for, with specific application to the accountancy profession. Their practice is to provide plug-in, ready-torun solutions for every aspect of compliant practice. Whichever route you go down, please expect the application process to be very thorough. The FSA is keen to verify as far as possible that all applicants are 'Fit and Proper', so you should expect lengthy declarations about your business and personal financial history. Usually, credit checks are also run, and don’t be surprised if CRB checks are involved as well. Based upon our experience, it is likely that opting for route (2) as an AR will save some time, as the FSA effectively delegates checks and responsibilities to the Network, which can be run in parallel with the main application. Which route is right for you? There probably isn't a simple answer to this question. Industry pundits vary in their fondness for the Network model, partly because a number of the big-name players in the industry have gone belly-up in recent years, or because some existing large players do not treat their members with the care that one would expect. Networks like ValidPath, have ploughed their own furrow, emphasising the building of a relationship which reflects Members’ needs, thereby avoiding those kinds of pitfalls. Our own view is that, with the FSA progressing down the line of 'Principles Based' regulation, it is becoming less and less likely that direct authorisation is a viable option for small firms. In fact, let’s not be mealymouthed about it: for a small firm to choose to be directly-regulated would appear to be either incredibly brave, or to exhibit the highest degree of mindless optimism. The style of regulation and the systems devised to deliver it, are not ‘friendly’ towards small firms. OK, so you are (a) trained and (b) authorised. What next?

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Your Notes

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REQUIREMENT #3 – AN APPROPRIATE BUSINESS ENTITY

I

t is on this point that you will probably spend the least time agonising.

Smaller, or sole-practitioner firms may well prefer to provide financial services advice from within the context of the main firm. This clearly has the advantage of simplicity, and may well also make it easier to present financial planning as simply one of a range of integrated services on offer. For larger firms, it could well make more sense to set up a separate, associate limited company or LLP to handle the financial services work. In 2006 the FSA abolished the requirement for small companies and Appointed Representatives to have an audit, which might have been an obstacle to this kind of approach. Setting up a separate entity to handle financial services business helps to ring-fence liabilities in respect of advice given - and this benefit works both ways. Due to the development of regulation, and also the passing of the various compensation initiatives (pension review, endowments, split-caps, precipice bonds etc), it could well be that financial services work is now actually less risky than traditional accountancy services. Setting up a separate company also makes more sense if you are bringing in an IFA from outside, and plan to have some element of equity participation as an incentive to build the business. Building the business on a shared equity basis needs careful thought, and will need you to assess the character, philosophy and business strategies of your IFA partner. In case you are interested, at ValidPath we are actually extremely positive about setting up Joint Ventures. We do, however, believe that if it is your intention to build your business venture, then you need to give your business partners incentives to do so. If you do intend setting up a separate associate company to handle financial services business, then it might be well to observe the following guidelines: q Where primarily do you expect to get your business from? q If your IFA practice is there primarily to service your accountancy clients, then we strongly recommend that you have a continuity of branding between the two entities; q Whilst this would be more appropriate to more established IFA practices, staffed by experienced advisers, if your primary aim is to seek business from other professional firms, by way of referral, then it would make sense to brand the IFA entity differently to the accountancy business; q When selecting a suitable business name, we would recommend that a major influence on choice should be the availability of domain names; q When choosing your business name, our recommendation would be that you don’t use terms like ‘financial services’. This will lump you together with about 90% of other mass-market providers. ‘Financial Planning’ is an improvement. You could also consider alternatives, such as ‘Financial Management’ or ‘Wealth Planning’. It is worth commenting that, in relation to requirement #2, whether you go for direct authorisation or Appointed Representative status, you will need to have your business entity set up prior to submitting applications to the FSA.

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Your Notes

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REQUIREMENT #4 – ADDITIONAL AUTHORISATIONS

A

s a financial intermediary firm, your primary authorisation is clearly with the FSA. Once that approval has been obtained, then everything else flows from that point.

There are, however, some additional permissions or ‘authorisations’ which will either be mandatory, or which may be required depending upon the type of work you envisage doing. We summarise below the types of ‘authorisations’ which all firms will require: Data Protection Registration You (or your firm) will need to register with the Data Protection Registrar, which has recently been renamed as the Information Commissioner’s Office. The website URL is: www.ico.gov.uk, and whilst providing a wealth of information via this portal, it also enables you to complete your application form online. To do this, select the ‘Quicklinks’ dropdown at the top of the page, and select ‘Notification’. This allows you to access the Application Form under the heading, “There are three ways to start the notification process...By Post”. It costs firms a fixed sum of £35 annually to be registered, and the two contact numbers are 0303 123 1113 and 01625 54 57 45. It should be stressed that any firm handling client data for marketing or analysis purposes will need to be registered, and to comply with the ICO’s principles for handling client data. Product-Provider Agencies In order to place business with insurance and investment companies, you will need to hold agencies with those companies. Each agency will need to be applied for, and sometimes this process is something of a long-haul. Once an agency is agreed, this will permit you to submit business, and also be remunerated by whatever commission profile is allocated to your account. Some product-providers are reluctant to grant ‘indemnified’ agencies to new firms, where the potential exists for large, up-front commission payments, initially unjustified by premiums received. In our experience, this is one of those areas where being part of a Network pays off - partly due to the higher scales of commission, and partly because the acceptance process is less fraught. As a general rule, most insurance companies won’t even deal with you until you have an agency set up. Most investment (unit-trust) companies will usually set up an agency upon receipt of your first case. And now we move on to a further permission which you will only require if you are authorised to handle mortgage business, and intend being active in that market... Consumer Credit Licence (CCL) If you intend being involved in the mortgage market, you will not be permitted to deal with lenders (banks and building societies) without your own CCL, which is obtained from the Office of Fair Trading. More information can be gleaned from the relevant website: www.oft.gov.uk. The cost of a licence is £135 for a sole proprietor, or £335 for a partnership or company. Application forms may be downloaded from the website, and the completed paperwork (+ cheque) should be forwarded to: Consumer Credit Licensing, Room 1C/5, Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London, EC4Y 8JX. If you have queries in relation to form-completion, you may phone 020 7211 8608.

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Your Notes
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REQUIREMENT #5 – A ROBUST COMPLIANCE FRAMEWORK

A

t this point in our guidance, it is difficult to comment on what other firms may do. We have nine years worth of experience within ValidPath, of reviewing structures and systems of firms around the UK, many of whom were not our Members.

Remarkably, our observation has been that, even when IFA firms are operating expensive 'back office' systems, when it comes to compliant processes, frequently the result is a complete lottery. There may be good reasons for this: 1. The initial learning curve with back-office systems is extremely steep, and usually pretty expensive. Firms commence using their software with an initial flush of enthusiasm which swiftly runs out, resulting in a partially learned, and inconsistently utilised software package; 2. Providers are happy to sell expensive software, but do not sufficiently link its functionality to your business process. The result is that you are unlikely to use it correctly or fully, if you do not feel that it 'fits' what you are trying to do; 3. Many Networks or Compliance Service firms provide huge generic compliance frameworks, but do little to help advisers integrate or adapt these materials to their business process.

In 2009, after nearly two years of due-diligence, ValidPath took the step of introducing a common backoffice platform across the network, with the specific aims of reducing costs for our Members, improving supervision and monitoring, streamlining commission reconciliation and generally minimising risks. We’ve had a steep learning curve, but now have one of the most robust, and certainly the most cost effective solution in the UK. However you elect to handle this in practice, your financial-planning business will need to have the following basic infrastructure: · · · · · · · a clear, documented compliance framework; some form of client (contact management) database, plus a standardised method of recording information about your clients; a work-in-progress register to keep a thorough record of all business transacted, and monitor the process of completion; a logical, repeatable, file structure – whether you are opting for paper-based or electronic filing systems; standardised letter-templates to aid you in the writing of compliant reports; broadband internet access; a system of checks and balances to make sure you don’t miss the obvious.

In addition to the above, if you are intending basing your business function upon an electronic filing system, we would strongly recommend the following: · · · · · a robust desktop multi-page scanner (such as the Fujitsu fi-5120c or equivalent); software allowing you to view electronic files on-screen, instead of having to open each one up individually; software allowing you to create and open PDF files; a colour laser printer; off-site online automatic backup system.

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Your Notes

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REQUIREMENT #6 – PROFESSIONAL INDEMNITY INSURANCE

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f you already operate within the market that ValidPath specialises in, then you will already have PII cover in relation to your accountancy and tax-planning services.

If the chosen business entity for handling financial services work is an existing accountancy firm, then it may be possible to extend your current PII cover so that it includes financial services work. Don’t be surprised if this is not possible, however! When the FSA introduced new standards for ‘compliant’ PII in 2001/02, the result was a huge contraction in the market, making it more difficult to obtain for new and existing IFA practices. Since then, we have seen a significant softening in the PII market, but even so much financial services insurance is provided by specialist underwriters, which may not also be active in other areas. At the time of writing, you should not have too much trouble obtaining compliant cover, but we would draw your attention to the following points of guidance: (1) It would be an offence to attempt to operate a financial advice practice without adequate PII cover. The FSA’s half-yearly online reporting process requires you to provide full details of your cover; It is worth utilising the services of a specialist General Insurance broker which is familiar with the PII market for financial services firms. This is because the broker will be able to avoid underwriters which have recently entered this sector and which are looking to ‘buy’ business on heavily-discounted terms. These are therefore more likely to put their premiums up through the roof when the market next hardens (which it is likely to do!); Because of the changing nature of the PII market, it is difficult to provide a reliable estimate of cost for new startups. A few years ago, a new firm (without any historic liabilities) would have struggled to obtain cover for much less than around £4,000 - £5,000. At the present time of writing, starting premiums with experienced and reputable PII underwriters might be as little as £2,000 for a (new startup) directly-authorised firm, but those premiums generally get hiked at renewal. At ValidPath, by dint of our commitment to collaborative working practices, and implementing risk-reduction processes, we’ve held our costs at £1,500 per Member firm since 2002; Excesses on PII policies tend to be relatively high, despite the softening in the market. If you can get your excess down to around £5,000, you may consider yourself to have obtained a good deal. You will need to self-insure that excess! In fact, the FSA applies quite complicated formulae to ensuring that regulated firms maintain adequate reserves. The costs of PII are a function of (1) market supply & demand, (2) perceived risks and (3) actual risks. You cannot influence (1) and (2), but you can influence (3). This has formed a very strong emphasis of ours over the years; Please expect the PII market for financial services firms to remain fluid. Premiums and terms are likely to vary, due to (a) claims experience and (b) supply/demand issues. Again, the use of a good General Insurance broker will help at times when there is contraction in the supply of compliant cover. The good news is that the FSA now appears to recognise these dynamics, and will work with regulated firms which are experiencing difficulty in obtaining cover, through no real fault of their own.

(2)

(3)

(4)

(5)

(6)

Remember - compliant PII is not an optional extra!

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Your Notes

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REQUIREMENT #7 – TOOLS FOR THE JOB

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ometimes, it is surprising how little anticipation we bring to the table, when seeking to offer a service to clients. Nowhere is this more likely to lead to failure than in the context of financial-planning. In the table below, we provide some ideas as to the types of essential resources you’ll be needing in order to deliver a good-quality service which delivers a profit. And, by the way, there is no need to spend an arm and a leg in the process! Our advice: start off using the cheap options, and only migrate to more expensive systems once you have identified the need.

CONTEXT Broad spectrum market research

TOOLS
Periodicals Investment Life & Pensions MoneyFacts (£156.50pa) Software The Exchange (£16pm); Assureweb (free) Taxbriefs ‘Professional Adviser’s Factfile’ - £69pa by DDM Taxbriefs also provide a range of other useful technical guides NTC Publications ‘Pensions Pocket Book’ - £45 (Prices correct in 2011) Software The Exchange; Assureweb; Synaptic Product Manager (c. £100pm) Websites www.fsa.gov.uk www.trustnet.co.uk Software Voyant - online tools for lifetime discounted cashflow modelling Certior Ltd - Excel spreadsheet based lifetime discounted cashflow modelling with monte-carlo simulation and output to Word (in our opinion one of the best currently available in the UK) Websites Product-provider intranet sites Insurance Business Links from The Exchange to product-providers for electronic submission (where available) ValidPath’s own backoffice system allows electronic business submission where this is possible Investment Business We strongly recommend the use of funds supermarkets or ‘Wraps’. One of the best is Transact, but other good choices would include Parmenion, Novia, Wealthtime and Ascentric.

Technical Reference

Narrowly-focused market research

Financial-Planning Computations

Business Placement

You’ll need to develop your own tools and systems for delivering core services economically, unless your service-provider does it for you.

Packaged Solutions

ValidPath provide a range of ‘instant’ solutions such as: (1) Pension Review Service, (2) Investment Risk Review Service, (3) Five-Minute Financial Healthcheck, (4) ValidPath Investment Proposition.
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Your Notes

Some ideas for routine, inexpensive marketing: n Email subscription list - build your list; send weekly emails; search for content on financial topics on the internet n Create an informed and pithy blog on your website n Regularly update your website with news of services; make it easy for people to respond or make enquiries; draw attention to your website on every item of literature & correspondence n Give away freebies - write an ebook for download n Publish casestudies - they can be of real clients, or fictitious if you are starting out, as long as the details stack up n Obtain testimonials from your favourite clients, and use them in mailshots, or on your website n Spend time with your favourite clients; get to understand their businesses; ask for referrals to individuals or firms that they deal with; become a specialist be good n Little and often - single issue newsletters or emails n Tacky n Keep your eyes open for ideas; maintain a marketing ideas file; don’t try too hard to dream up something original - adapt for your clientele n Do a client survey: what your clients actually want?

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REQUIREMENT #8 – REAL-WORLD MARKETING

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t’s almost the most overlooked secret to success: unless you commit yourself to routine, regular, sausage-machine type marketing, across a variety of media, your business will never be a success, even if it offers a superlative quality service.

Many of us only ‘do’ marketing when business is slow. Bad move! Our efforts may then be tinged with desperation, and by that point we need immediate results. Market when you are already busy, when (technically) you don’t need the extra business - the worst that can happen is that you create some space to get rid of unprofitable clients. Many of us ‘do’ marketing sporadically, sometimes with a faint sense of unease. In fact, it needs to be part and parcel of our overall business process. At ValidPath, we provide template marketing materials, and assist our Members in the discipline of regular client-contact.

Attract Prospects

Make Contacts

Gather Leads

Collect Referrals

Pipeline

Follow-Up
No

Get Meeting
Yes

Get Referral Close Sale Provide Service
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Your Notes

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REQUIREMENT #9 – JOINED-UP SERVICES

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n page 3 we alluded to the fatal curse on financial services work in an accountancy context. If you regard this area of service as an ‘added-extra’, to be deployed after you’ve dealt with everything else, then it will fail. No doubt about it.

Theoretically at least, this pitfall should afflict smaller or sole-practitioner firms less than it does larger practices where areas of function get rigidly compartmentalised. However, because the condition may be terminal in business terms, it makes sense to address it from outset. Our recommendation is that you map out how your services will ‘look’ and also be deployed, from the outset. Avoid the optional-add-on mentality, where you get to the end of presenting the set of accounts, hesitantly turn to the client, smile winningly and say, “can we help you with your pension?”. Instead, it is far better to present your business proposition on the basis of, “this is how we do things here”. Here’s just a few ideas of how you might manage this in practice...

ac -employed Set of self

counts

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Brainstorming with the client, using the known data, can very quickly result in agreed strategies for improving the clients current and future financial positions. How often do we simply stop short? How much of this subject is a perfectly valid topic for the accountant to deal with?

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Your Notes

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REQUIREMENT #10 – ESSENTIAL LITERATURE

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ver the years, we have watched accountancy-based IFAs invest painful amounts of effort, energy and hard cash, into lovely glossy brochures. These items occupy pride of place in reception, sometimes they get used at seminars, but then they get relegated to some dusty cupboard.

Why is this? One answer is that they are too heavy to mail routinely. Another is that a sneaking suspicion begins to dawn that (perish the thought) clients don’t actually read them. Glossy brochures are an expensive way of padding our egos. For the purpose of effective marketing, we recommend that you save your money, not to mention your cupboard space. Here are a few essential items of literature that you will need for your IFA practice: Letterhead However you want it designed, but please make it practical. Some firms stick so much graphical material on them that it is almost impossible to use them for a normal letter. Ensure that your main contact details are clearly visible, and find some way of driving clients to your website. The letterhead will also need to contain at the foot, the following regulatory items: Ÿ Companies House registration details if applicable Ÿ The relevant FSA wording - for a directly-regulated firm, this will read: “XXX Ltd is authorised and regulated by the Financial Services Authority”. With-Compliments Slip Similar in design to letterhead, and will need to keep the same regulatory wording. Make sure there is adequate space for handwritten messages. To reduce overheads you could map out three copies on a page of A4, laser-print them, and then guillotine into individual slips. Business Cards These items will also need to have the regulatory wording included. Do not worry too much if this requires a very small font, provided that it is still clear and legible. Disclosure documents - Recommended We recommend (to our Members) that they think very carefully about how their advice process works, and then systematise into that process the formal disclosure documents that we are required to give to our clients. These would include: (1) what was known as the CIDD, comprising the KeyFacts Guide to Services & Costs; (2) the client agreement (RCA); (3) Agenda for first meeting; (4) checklist of requirements (eg. AML evidence of identity) etc. Leaflets etc An A4 trifold is probably the most that a client will manage to read without falling into a coma. Try to keep it visual and as simple as possible. Our recommendation is that, instead of covering a range of issues, you try to focus on one main topic, and deal with that clearly. Trifold leaflets can usually be managed by using a simple Desk-Top Publishing package (such as Serif’s PagePlus) and a decent colour laser printer, but do remember to use good quality, bright-white paper. Clients will not be impressed with ink-jet prints (involving the usual missing lines) onto paper that would not be out of place in your toilet. If you are going to have professionally-printed literature, we recommend the use of single-topic postcards, with a powerful image on the front. The key is to grab attention, and perhaps to direct potential clients to your website for more information.
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Your Notes

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REQUIREMENT #11 – A WORKABLE STRATEGY

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onsider the following nightmare scenario. You take your CFP qualifications - and pass with flying colours. You apply for FSA approval (either route), and get your authorisation. You’ve got your PII sorted, and nice, crisp literature is sitting there, ready to be used. You send out a mailshot to your clients, announcing that you can now ‘do’ financial services, perhaps place an ad in the local paper, sit back and wait for the business to roll in. Of course, it does not. And, predictably so. We recommend that you devise a business development strategy. It should take on board the kinds of principles we have outlined on pages 12-13. Here’s a broad outline of the issues you’ll need to address: q Get up and running fast. q Avoid the temptation to endlessly fine-tune your service before you start promoting it. q Don’t spent a penny more than you have to. q Look at what the competition are doing, see if you can do it better - but whatever you do, don’t compete on price! q Listen to your clients, and ensure that your service hits all the right spots. Easy to startout right, rather than have to re-engineer things in a little while As you spend time devising your business strategy, it might help to reflect on the issues which are now clearly understood as being important to our clients:
Source: Cerulli Associates FPA Principal Member Survey November 2002

Where advisers spend their time What clients value

Financial Data data gathering analysis

Plan prep

Implement & admin

Product advice

Present plan

Review & ongoing service

Relationship mgt

Business Strategy Marketing Plan Action!!
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Where will you place the emphasis?

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Your Notes

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REQUIREMENT #12 – MOVE BEYOND THE TRANSACTION

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here is an ‘old model’ for financial services advice within an accountancy context. It works this way: the accountancy partner realises that the client sitting in front of him has a significant liability to higher-rate income tax, and limited opportunity to reduce that liability. It is April 2nd.

A quick phone call is all it takes. The tame IFA is wheeled in front of the client, and hey-presto! within a very short period of time, a single-premium pension contribution has been made, sufficient to reduce or entirely eliminate the danger of tax at 40%. Now, what can possibly be wrong with that? A quantifiable immediate benefit has been delivered (a reduction in tax) and a secondary deferred benefit has been created (an entitlement to continuing income at some later date). Surely, one would have to be particularly small-minded to quibble with the service that has been delivered? And, of course, one cannot deny that these are significant benefits for the client, which he might not otherwise have accessed, and that the accountancy IFA has generated remuneration which would not have arisen otherwise. There are, however, problems with this kind of approach, which it might help to unpack a little: n the IFA is reduced to the stature of an ‘order-taker’. He has been wheeled in, and then wheeled out, at the behest of the partner to fix a single perceived issue. His significant analytical skills or experience have not been used; n in effect, the unauthorised accountant has been in the driving-seat in terms of determining what is appropriate for that client and what is not; n a similar incident might happen next year, but whether it does or not, the client has been educated to see financial advice/planning as essentially a series of transactions. In his mind, if there is no transaction required, then he does not need the IFA’s services. Nothing could be further from the truth! n inevitably, one has to question the objective basis for recommendations made so swiftly when the deadline is so tight; n in practice, it is these occasional, ad-hoc transactions which come back later on to haunt advisers, in terms of complaints; n whilst the use of a single pension contribution (in this instance) might be valid as a method for fixing a problem, to what extent might that focus override other, more significant issues which might be troubling that client? To what extent has this single ‘apparent need’ actually masked the real, more pressing issue? n to what extent have advisers in such circumstances effectively contented themselves with the ‘canapes’ when there is actually a full five-course banquet waiting for them, if we just do our job more effectively? n transactionally-based businesses are of a fundamentally precarious nature. What if, during a recession, new business transactions dry up? It is for these kinds of reason that at ValidPath we have always actively promoted genuine ‘advice-based’ solutions, and train our Members to work collaboratively with their accountant colleagues to develop revenue streams that are entirely independent of having to effect some kind of transaction. If you wish to most effectively exploit this sector, your business proposition must genuinely seek to move beyond the transactions themselves. The real kudos, satisfaction and money is made through the delivery of highly-personalised planning solutions for your clients’ real needs and objectives.
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Your Notes

ValidPath was the 10th fastest-growing company in Wales from 2005-2007.

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WHERE TO GO FOR MORE INFORMATION...

We’d like to draw your attention to our own website which you’ll find at: www.validpath-network.co.uk

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f you have been reading the PDF version of this booklet, you will have noticed plenty of links to websites where you can access supporting information to help you.

Find out about our market-leading backoffice administration system and our stakeholder-charged investment advice proposition

Learn about our commission-management system and access details of our two-tier service proposition

Quickly find out a lot about our unique service proposition

Our regular blog entries reflect upon relevant industry and professional issues. Slightly off the wall, but always with a serious message!

Like an iceberg, 90% of ValidPath’s website content is only available to registered Users. You’ll need to be a Member to access our: Business Development Resources, ValidPath Investment Proposition toolkit, QuickStart Advice Library, online version of our ‘Best Practice Platform’ and a whole host of other essential resources.

ValidPath offers a unique way of supporting IFAs and financial planners under the ‘network’ model. We are continually developing new services and resources to make our Members more effective and more profitable in the brave new ‘RDR World’. If you’d like to be kept up to date, why not register with us by clicking on ‘About Us’ and then ‘Enquiry Form’. Alternatively, if you are reading this in PDF format, you could just click here!

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ValidPath exists to make the delivery of financial planning advice: Ÿ Affordable Ÿ Repeatable Ÿ Profitable Ÿ Enjoyable Ÿ Manageable, and Ÿ Safe!

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For more information about starting a successful accountancy-linked IFA practice, please visit www.validpathnetwork.co.uk.

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Your best route to a thriving practice

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Feedback by Fax!
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