Adviser warning: Change or exit the industry

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Think your 2012 results were good? 2013 could be vastly different, and those planners who fail to change with the times will have to leave the market.

This is the opinion of Seaview Consulting director David Fotheringham, who said that financial planners must change their approach in the new year if they hope to be prosperous.

“Those that don’t take on that challenge will fail to make significant returns and will look to sell or to move out of the industry,” he said.

“The reality in financial services is that regulatory changes coupled with demands for higher professional standards are impacting on businesses and business models – and doing nothing is simply not an option.”

He said there were very few alternatives for advisers so they must exit the market or face the challenges and get on with the job.

The biggest challenge will be for smaller businesses who will just find it too hard, he said.

“The easiest path of least resistance will be to sell or to move out of the market.”

He believes that, with revenue decreasing and costs increasing, the rewards in 2013 will be different to those in 2012.

Fotheringham explained that client satisfaction will have to become a bigger focus for practices and, instead of making assumptions, advisers will have to ask the hard questions – particularly, do customers feel they are getting value?

He is not confident all businesses will tackle the challenge successfully, but offered 10 business principals to those who are committed to making a change in 2013:


  • Up-to-date & accurate reporting: Progress towards a goal needs to be measured and monitored to ensure the need for corrective action is identified early. All performance reporting should be available no later than 10 business days after the month end, ideally five days.
  • A quarterly plan/commitment to change something: Clear focus and commitment to make a positive change to a specific area is essential. Setting short term goals and measuring progress toward these goals will result in small but incrementally significant changes. Develop a culture of continuous improvement, celebrating regularly successful changes.
  • Clarity on the cost of delivery for each service: A clear understanding of the cost of delivery is essential for supporting the accurate pricing of services and articulating to clients the effort required to deliver their services. Without a thorough understanding of the process to deliver services there is limited scope for identifying areas for improvement.
  • Client contact to administration activity: Increase focus on client engagement and service. Administration won’t pay the bills, clients do. Furthermore, clients should be made aware of the services provided in order to appreciate the value received from their fees. If you’re not telling them your competitors will be. Refocus staff’s efforts onto activities that impact the client, consider tracking the time to complete specific activities in order to monitor efficiencies and identify causes of delays.
  • Labour to income: Labour is the greatest cost in a professional business. Utilising shared labour costs i.e. receptions with co-tenants, virtual PA’s, etc. or paying for outcomes/results are alternatives not often explored. Look to support growth through utilising services on a completed task basis rather than fixed salary.
  • Costs to Income or EBIT%: A deeper analysis of costs is required, splitting costs into Fixed (incurred irrespective of work done) and Variable (costs incurred directly to revenue generation activity) will enable the business to manage costs better.
  • Complacency around suppliers, their fees and quality tends to occur over time. A bi-annual review of all key supplier arrangements should be made and measured against defined service level expectations.
  • Client mix to target market (including) retention: Over time not all new clients meet the desired profile of the businesses target market and these clients become a limitation to growth. Regularly reviewing the client base for suitability is essential. Selling or referring clients to a more suitable provider creates capacity and possibly increased profitability.
  • Client conversion: Converting prospects to clients involves tracking a number of measures to ensure new client targets are achieved. A general rule of thumb is one new client every two weeks per adviser.
  • Time allocated to working on the business (not in the business): Too often business owners get embedded in the day to day operations of the business which may appear to be cost effective in the short-term. On a regular basis, say quarterly, business principals should engage professionals or trusted individuals to critique the company and progress of the business towards its stated goals and change initiatives.
  • Client satisfaction: Only clients generate revenue – ensuring they remain pleased with service levels and that their needs are being addressed is essential.