Advisers must move beyond wealth-based client selection to become approachable, affordable, and indispensable for a sustainable and inclusive industry. That’s the view of Katie Brinsden (pictured), Managing Director at the national, directly- authorised IFA, Truly Independent, as she explains in this, her latest blog for IFA Magazine.
How does a financial adviser decide whether to take on a client? This question might strike you as rather vague, but it goes to the heart of an issue that is likely to be pivotal to the future of our industry.
The answer is often that the decision is determined by a client’s wealth. In other words, an adviser prefers to guide the financial journey of someone who has already “made it” or is manifestly closing in on that enviable goal.
While it may sound perfectly pragmatic, such an approach clearly flies in the face of the notion that everyone can benefit from our expertise. By way of illustration, consider the sphere of credit ratings.
The Experian system, which is widely used in the UK, is based on a range of credit scores from zero to 999. These relate to five broad categories of rating: “very poor”, “poor”, “fair”, “good” and “excellent”.
With this spread in mind, let us imagine a would-be client. Angharad lives in Conwy, North Wales. She is single and in her early 30s. She has a decent job and solid promotion prospects, and she is thinking about buying her first home.
She has taken several sensible steps towards establishing a firm financial footing. Thanks to a commendable determination to save more and spend less, she has a reasonable amount of income at her disposal for the first time in her life.
Although none of this guarantees a spectacular credit rating, she is pretty confident she will rank as “good” on Experian’s scale. Unfortunately, it turns out that her optimism is misplaced.
The reality is that she instead falls squarely in “fair” territory – which, incidentally, is the average for Conwy, according to Experian’s interactive map of scores across the UK. As a result, under the traffic-light hierarchy employed by various rating systems, she fails to earn the “green for go” she so desperately wants.
It is at this point that Angharad could benefit enormously from informed insight and guidance. Maybe above all, she needs to know how she might use her disposable income to reduce her debt, improve her score and start building a stable platform for accumulating wealth.
So, should she seek assistance from the advice community? Would she even be granted an audience? Or would she discover she is wasting her time – not to mention the precious energy and resources of those she dares suppose might be willing to help her?
This is a purely hypothetical scenario, of course. Yet it is by no means an exaggeration, less still a deliberately unrealistic example born out of poetic licence.
The chances are that we have all encountered comparable tales. A few months ago, for instance, I heard of one adviser with a set-in-stone policy of shooing away anyone with less than £100,000 to invest.
In truth, would-be clients have an unhappy abundance of these stories to tell. Those without pensions are particularly at risk of being cold-shouldered. It appears some advisers enforce lofty standards.
Yet what does this sort of “high bar” ethos ultimately indicate? In my opinion, it shows a worrying tendency to concentrate on the wealthy and forget about everyone else.
By extension, it also shows many advisers are either disinclined to embrace the principle of financial advice for all or operating within a business model that cannot facilitate it. They do not accept our profession has the capacity to make a positive difference to millions of lives.
This could prove an extremely shortsighted view. There is a strictly limited number of millionaires to go around, after all, so where will these advisers direct their attention when no members of the modern-day jet set are left to be snapped up?
All things considered, would it not be more useful to play a part in creating a few more millionaires? More pertinently, should we not all strive to enable as many people as possible to save, prosper and move up the ladder?
The UK has now been suffering from an “advice gap” for more than a decade. How can we hope to tackle this problem when so many advisers apparently remain hellbent on squabbling over the business of those who are already well on their way to ensuring their own long-term financial security?
I mentioned at the outset the future of our industry. Call me a dreamer – or much worse if you wish – but I believe the brightest way ahead for all concerned lies in advisers being seen as approachable, affordable and indispensable.
The continued prevalence of a “one size fits all” model represents a significant barrier to this ideal. And if that one size instantly rules out most of the population – as frequently seems to be the case – we could all soon be asking whether our chosen line of work is genuinely sustainable.
Katie Brinsden is Managing Director of Truly Independent.
